Buy a home and renovate it - in one mortgage
Found a home that's perfect except for the kitchen? The Purchase Plus Improvement program lets you add renovation costs to your mortgage - at mortgage rates, not credit card rates.
Start your purchase application →What is a Purchase Plus Improvement mortgage?
A Purchase Plus Improvement mortgage lets you buy a home and finance planned renovations in the same mortgage, so the new kitchen or windows are paid for at mortgage rates instead of with a personal loan or credit card. The lender appraises the home's improved value, your lawyer holds the renovation funds at closing, and the money is released once the work is finished.
- Renovation costs are added to the purchase mortgage, based on the home's value after the work.
- Insured purchases commonly allow improvements of up to about 10% of the as-improved value.
- Down payment minimums apply to the purchase price plus the renovation amount.
- Renovation funds are released after the work is complete, not at closing.
~10%
Of improved value (insured, common limit)
5%
Min down payment
90–120
Days to finish work (typical)
1
Mortgage, not 2 loans
How Purchase Plus Improvement works
When you find a property that needs work, instead of buying it and then taking out a separate loan for renovations, you include the renovation costs in your mortgage. The total mortgage amount is based on the improved value of the home.
One catch to plan for: the renovation money isn't handed over on closing day. Your lawyer holds it until the work is done and confirmed, so most buyers pay the contractor from savings, a line of credit or a contractor payment schedule, then get reimbursed when the funds are released.
- 1
Get your purchase offer accepted
Ideally with a financing condition long enough to collect renovation quotes.
- 2
Get written renovation quotes
Lenders want contractor quotes that itemize the work and costs.
- 3
Appraiser confirms the improved value
The appraisal estimates what the home will be worth once the work is done.
- 4
Mortgage approved for purchase plus renovations
Your down payment is based on the purchase price plus the improvement amount.
- 5
Renovation funds released once work is done
The improvement portion is held by your lawyer and released after the work is complete and confirmed, usually by a follow-up inspection.
✓ What qualifies
- • Kitchen and bathroom renovations
- • New flooring, painting, fixtures
- • Windows, doors, and siding
- • Basement finishing
- • Structural repairs
- • Energy efficiency upgrades
✗ What doesn't qualify
- • Landscaping or outdoor features
- • Furniture and appliances (standalone)
- • Swimming pools or hot tubs
- • Additions that change the footprint (use a construction mortgage with progress draws instead)
Mortgage vs. personal loan for a $35,000 renovation (illustrative)
Example assumptions only, not current rates: a 5-year personal loan at 10%, versus adding the same amount to a 25-year mortgage at 5%.
Personal loan @ 10%, 5 years
≈ $744/month
≈ $9,619 interest; paid off in 5 years
Added to mortgage @ 5%, 25 years
≈ $204/month
≈ $8,191 interest in the first 5 years; ≈ $30,978 still owing
The mortgage route cuts the monthly cost by about $540, which matters in the first years of ownership. Over the full 25 years, though, the $35,000 would cost about $26,069 in interest if you never prepay. Putting some of the monthly difference toward prepayments closes that gap. Test your own numbers with the mortgage payment calculator.
Already own your home? Purchase Plus Improvement doesn't apply, but you can still fund the work through renovation financing on a home you own, a home equity line of credit, or by refinancing your mortgage up to 80% of the home's value. Buying your first place? Our first-time buyer guide covers the FHSA and Home Buyers' Plan, which can go toward the larger down payment.
Frequently asked questions
Questions buyers ask before adding renovations to a purchase.
How does a Purchase Plus Improvement mortgage work?
You buy the home and add the cost of planned renovations to the mortgage in one approval. The lender bases the mortgage on the home's value after the improvements. The renovation money is held by your lawyer at closing and released once the work is finished and confirmed, so you'll usually need to pay the contractor first or arrange short-term funds.
How much can I borrow for renovations?
It depends on the lender and whether the mortgage is insured. On insured purchases, the improvement amount is commonly limited to about 10% of the as-improved value, and some lenders also set a dollar cap. Conventional mortgages with 20% or more down can allow more, subject to the appraisal.
How much down payment do I need?
The same minimums as any purchase, calculated on the purchase price plus the renovation amount: 5% on the first $500,000 and 10% on the portion from $500,000 up to $1.5 million. If the total is $1.5 million or more, you need 20% down.
When do I get the renovation money?
After the work is done. The improvement funds are held in trust at closing and released once the lender confirms completion, usually through an inspection or updated appraisal. Most lenders expect the work to be finished within about 90 to 120 days of closing.
What if I already own the home I want to renovate?
Purchase Plus Improvement is only for purchases. If you already own, you can fund renovations with a refinance, a home equity line of credit or a dedicated renovation financing program.
Found a fixer-upper?
Tell us about the property and the planned improvements. An agent will compare lenders that offer Purchase Plus Improvement. Free to apply, no obligation.
Start your purchase applicationRelated renovation and equity options
Renovation financing
Already own? Fund renovations with your home's equity.
Learn moreHome equity line of credit
Draw renovation money as you need it from a revolving line.
Learn moreMortgage refinancing
Refinance up to 80% of your home's value for a larger project.
Learn moreConstruction financing
Major structural work or a full rebuild? A construction mortgage may fit better.
Learn moreFirst-time home buyer mortgages
Down payment rules and programs for first-time buyers.
Learn more