Free · An estimate, not an approval
Purchase Plus Improvements Calculator
Renovation money at mortgage rates instead of credit-line rates, arranged before you close — what it lends, what it genuinely saves once the amortization is held constant, and the cash you have to find first.
Your purchase
- Lending value
- $685,000
- Total mortgage
- $635,612
- Monthly payment
- $3,550
- Minimum down
- $43,500
The saving needs one more step
Held to the same 10 years, the mortgage rate saves $26,387. But spread across your 25-year amortization the same renovation costs $43,905 — $1,504 more than the credit line you are avoiding. The extra years cost more than the cheaper rate saves.
This is not a reason to skip the programme. Take the money at the mortgage rate, then clear the renovation portion early with your prepayment privileges — ask what they are before you sign, not after.
Adding $65,000 of renovation raises your minimum down payment from $37,000 to $43,500 — $6,500 more — because the minimum is calculated on the lending value, not on the purchase price. It is the most commonly missed cost of using this programme.
Renovation budgets are capped two ways and your $65,000 is above the dollar ceiling: commonly 20% of the as-improved value ($148,000 here) and a streamlined ceiling around $40,000. The dollar ceiling is the one that usually binds and the one most calculators never check. Larger budgets exist under some programmes with more documentation — this is a conversation with a broker, not a decline.
The renovation money is held in trust until the work is done and re-inspected, so you fund the work yourself first. Carrying $65,000 for the 3 months this kind of work typically takes costs about $1,786 at 10.99% — which comes straight off the $26,387 the programme saves you, leaving $24,601.
Not every lender offers this, and the caps differ between the ones that do. A broker can tell you which version you would actually get before you commit to a renovation budget.
Talk to a brokerThe same $65,000 renovation, three ways
Total interest, so the comparison is like for like. The middle row is the one that matters: the same mortgage rate, cleared on the same horizon as the credit line. That is what the programme is actually worth.
Why the monthly payment looks better than the saving is
Financing the renovation inside the mortgage appears to save $531.99 a month against a credit line. Only $219.89 of that is the rate — 59% of it is simply taking longer to pay. Real cash-flow relief, but not the same thing as costing less.
- The lower rate
- $219.89
- Simply taking longer to pay it
- $312.10
- Apparent monthly saving
- $531.99
What the lender will lend against
- Price plus renovation
- $685,000
- Appraised after the work
- $740,000
- Lending value usedThe lesser of the two — bound here by the price plus the renovation
- $685,000
- Renovation budgetAbove the binding cap of about $40,000 — 20% of value is $148,000, and the streamlined dollar ceiling is $40,000
- $65,000
Your mortgage
- Total mortgageIncluding the capitalised default insurance premium
- $635,612
- Monthly payment
- $3,549.81
- Down paymentThe minimum on this lending value is $43,500 — $6,500 more than the $37,000 the price alone would need
- $68,500
- Loan-to-value
- 90.0%
What that comparison means
- What the rate alone savesBoth cleared over 10 years, so the comparison is rate against rate
- $26,387
- What the extra years costSpreading the same renovation across 25 years instead of 10
- $27,891
- The rate wins up toPast this amortization the extra years cost more than the cheaper rate saves
- 24.3 years
The cash you need first
- Held in trust until the work is doneYou fund the renovation yourself and are reimbursed after the re-inspection
- $65,000
- Typical time for this kind of workInside the 120-day deadline lenders usually set
- 3 months
- Cost of carrying it meanwhileAt 10.99% for 3 months
- $1,786
- Saving after that carrying costAgainst the like-for-like rate saving above
- $24,601
How it runs, and where the cash has to come from
The renovation money does not arrive at closing. It sits in trust until the work is finished and re-inspected, which is why step four is the one that decides whether this programme is workable for you.
- 1Get written contractor quotesBefore financing is finalised. The re-inspection is checked against these, so the scope has to be right
- 2Lender approves on price, quotes and the as-improved appraisalLending against $685,000, bound by the price plus the renovation
- 3The purchase closesThe renovation money does not come to you here — it goes into trust
- 4You fund and complete the workAbout 3 months for this kind of work, carrying $65,000 yourself — roughly $1,786 in carrying cost
- 5The lender re-inspectsConfirming the work matches the quotes, inside the lender's deadline of about 120 days
- 6The funds are released from trustReimbursing you, at which point the renovation is genuinely financed at your mortgage rate
Before you commit to a budget
The whole case for this programme is the rate gap against what you would otherwise use. Price that alternative properly, and check what the renovation does to the insurance premium on the larger lending value.
A planning estimate, not an approval. Programme caps, qualifying rules, completion deadlines and which lenders offer this at all vary by insurer and change — confirm every constraint here with a broker before you commit to a renovation budget or sign anything conditional on it. The renovation comparison amortizes the renovation amount alone at your mortgage rate and, separately, at the credit-line rate you entered over 10 years; a credit line compounds monthly while a fixed mortgage compounds semi-annually, and each is treated on its own convention. The rate saving is quoted with the horizon held equal, because comparing a 25-year schedule against a 10-year one measures the amortization rather than the rate. Programme caps are planning figures that differ by insurer and lender and change — the percentage and the dollar ceiling both apply, and the dollar ceiling usually binds first. The carrying cost assumes you fund the work at the same rate you were comparing against, over a typical completion window for that kind of work; your own timeline and your lender’s deadline may both differ and are worth getting in writing.
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What this calculator does
Purchase Plus Improvements lets you finance planned renovations into the purchase mortgage itself, at mortgage rates, arranged before you close. It is a genuinely good programme and most buyers have never heard of it — the usual alternative is closing first and then paying for the work on a credit line at two or three times the rate.
This page works out what the programme will actually lend against, what that does to your minimum down payment, and what the renovation really costs once the comparison is made properly. It also prices the part that catches people: the money is held in trust until the work is finished, so you fund the renovation yourself first.
It is deliberately not a sales page for the programme. The rate advantage is real and worth having. It is also easy to hand back, and the page shows exactly how.
- The lending value — the lesser of price plus renovation, and the as-improved appraisal
- What adding a renovation does to the down payment you need
- The same renovation costed three ways, with the rate effect separated from the term effect
- Both programme caps, including the dollar ceiling most calculators ignore
- The cash you must carry before the funds are released, priced
The lending value is the whole programme
The lender lends against the lesser of two figures: the purchase price plus your renovation budget, and the appraised value once the work is done. On the default figures here that is $685,000 against a $740,000 as-improved appraisal, so the price-plus-renovation side binds and the full budget is financed.
Turn it around and the picture changes sharply. If the appraiser thinks the work adds less value than it costs — which is common for anything other than kitchens, bathrooms and basements — the appraisal caps you, and the difference comes out of your own pocket on top of the down payment.
This is why the order matters. Get the contractor quotes first, then find out whether the as-improved appraisal will support them. Doing it the other way round is how people end up short of cash two weeks before closing.
- Lending value is the lesser of price plus renovation, and the as-improved appraisal
- If the work adds less value than it costs, the appraisal is what binds
- Any shortfall is funded by you, on top of the down payment
- Quotes first, then the appraisal — not the other way round
- Structural work and additions are the likeliest to appraise short of their cost
It raises the down payment you need
The minimum down payment is calculated on the lending value, not the purchase price. That sounds like a technicality and it is worth real money.
On the defaults here, a $620,000 purchase on its own needs $37,000 down. Add a $65,000 renovation and the lending value becomes $685,000, so the minimum rises to $43,500 — $6,500 more, needed in cash at closing, before you have spent a dollar on the work itself.
It is the most commonly missed cost of using this programme, and it lands at exactly the moment when cash is tightest. It is also entirely predictable, which is the point of checking it now.
- The minimum applies to the lending value, not the purchase price
- On the defaults: $37,000 becomes $43,500, a $6,500 increase
- It is due in cash at closing, before any renovation spending
- Larger renovations raise it further, on the same tiered scale
- This is separate from, and on top of, the money you must carry for the work
The saving is real — and easy to hand straight back
This is the part worth reading twice. Financing $65,000 of renovation at 4.59% instead of 10.99% is obviously cheaper, and over a common ten-year horizon it saves $26,387 of interest. That is the honest comparison: rate against rate, horizon held equal.
But the programme puts the renovation on your mortgage amortization, and this page defaults to twenty-five years, as most mortgages do. Stretched that far, $65,000 at 4.59% costs $43,905 in interest — against $42,401 for the credit line cleared in ten. So as configured, the far cheaper rate costs $1,504 more, because the extra fifteen years cost more than the lower rate saves. The break-even sits at 24.3 years.
None of that is an argument against the programme. It is an argument for using it properly: take the money at the mortgage rate, then clear the renovation portion early with your prepayment privileges rather than letting a kitchen amortize alongside the house. Do that and the $26,387 is genuinely yours.
- Held to the same horizon, the rate saves $26,387 of interest
- Over a full 25-year amortization it costs $1,504 more than the credit line
- Break-even is 24.3 years on these figures — most mortgages are longer
- The fix is prepayment privileges, not avoiding the programme
- Ask your lender what those privileges are before you sign, not after
Why the monthly payment flatters it
The monthly comparison is the one most calculators lead with, and it is the most misleading number on the page. Financing the renovation inside the mortgage costs $363 a month against $895 on a credit line — an apparent saving of $532.
Only $220 of that is the lower rate. The other $312 — 59% of the gap — is simply spreading the same debt over fifteen more years. Run both at ten years and the monthly difference collapses to $220, which is what the rate is actually worth.
That $312 is real cash-flow relief and worth having, particularly in the first years of owning a home when money is tight. It is just not a saving, and a calculator that presents it as one is telling you something untrue in a way that costs you money.
- $532 a month appears to be saved against a credit line
- $220 of it is the rate; $312 is the longer amortization
- 59% of the apparent saving is term, not rate
- Cash-flow relief is worth having — it is simply not the same as costing less
- Compare at equal horizons whenever you compare two ways of borrowing
Two caps, and the one nobody checks
Renovation budgets are limited in two directions at once: as a share of the as-improved value, commonly around 20%, and by a dollar ceiling, commonly around $40,000 for the streamlined version of the programme.
Almost every calculator checks the percentage and stops. On the defaults here, 20% of the as-improved value is $148,000 — a $65,000 budget passes comfortably. The dollar ceiling is $40,000, which the same budget exceeds by $25,000. The constraint that actually binds is the one that never gets checked.
Exceeding it is not a decline. Larger renovations exist under some programmes with more documentation and a different underwriting path, and not every lender offers every version. It does mean the conversation with your broker has to happen before you commit to a budget rather than after.
- Capped both as a share of as-improved value and in dollars
- On the defaults: $148,000 by percentage, around $40,000 in dollars
- The dollar ceiling usually binds and is usually the one omitted
- Exceeding it means a different underwriting path, not an automatic no
- Caps vary by insurer and lender and move — confirm yours specifically
You pay for the work before you are paid for it
The renovation money does not arrive at closing. It goes into trust, and it is released only after the work is finished and the lender has re-inspected the property against the original quotes. Until then you fund the work yourself.
That has a price nobody quotes. Carrying $65,000 for the three months a kitchen typically takes, at the same credit-line rate you were avoiding, costs about $1,786 — which comes straight off the saving. The programme is still ahead, but by less than the headline suggests.
There is also a deadline. Lenders generally want the work completed and re-inspected inside about 120 days. Cosmetic work and a kitchen fit comfortably; an addition typically does not, and running past the deadline can mean the advance is withdrawn after you have already spent the money. Get the deadline in writing before you commit to a scope.
- Funds sit in trust until the work is complete and re-inspected
- You fund the renovation first and are reimbursed afterwards
- Carrying $65,000 for three months costs roughly $1,786
- Lenders typically want the work finished inside about 120 days
- An addition rarely fits that window — confirm the deadline in writing
Using your results well
Get written contractor quotes before you settle on a budget. The lender needs them, the re-inspection is measured against them, and having them early tells you whether the as-improved appraisal will actually support what you want to spend.
Then ask two questions the brochure will not answer for you: what the dollar cap is on the specific programme your lender uses, and what your prepayment privileges are. The first decides whether your budget fits. The second decides whether the saving survives the amortization.
And be honest about the cash. If you cannot fund the work up front, or find someone who will, the trust-release structure means the programme does not work as planned — and that is the single most common reason these deals come apart after closing rather than before.
- Written quotes before the budget, and before the appraisal
- Ask for the specific dollar cap on your lender’s version of the programme
- Ask for your prepayment privileges in writing — the saving depends on them
- Confirm the completion deadline before committing to a scope of work
- Make sure you can genuinely fund the work before the trust release
Common questions
What is Purchase Plus Improvements?
A mortgage programme that lets you finance planned renovations into your purchase mortgage at mortgage rates, arranged before closing, rather than paying for the work afterwards on a credit line at two or three times the rate. The lender approves against the home’s value once the improvements are done, subject to caps.
How much can I add to my mortgage for renovations?
The lender lends against the lesser of the purchase price plus your renovation budget and the appraised as-improved value. On top of that the renovation portion is capped both as a share of as-improved value — commonly around 20% — and in dollars, commonly around $40,000 for the streamlined version. The dollar ceiling usually binds first and is the one most calculators never check.
Does adding renovations increase my down payment?
Yes, and this surprises almost everyone. The minimum down payment is calculated on the lending value rather than the purchase price. On the figures here, a $620,000 purchase alone needs $37,000 down; adding a $65,000 renovation raises the lending value to $685,000 and the minimum to $43,500 — $6,500 more in cash at closing, before you spend anything on the work.
Is financing renovations in my mortgage cheaper than a credit line?
At the same payoff horizon, clearly yes — $26,387 of interest saved on these figures. But the programme puts the renovation on your mortgage amortization, and over 25 years that same $65,000 costs $43,905 in interest against $42,401 on a credit line cleared in 10, so the cheaper rate is entirely consumed by the extra years. Break-even is 24.3 years. Take the programme for the rate, then clear the renovation portion early with prepayment privileges.
When do I actually receive the renovation money?
Not at closing. The funds are held in trust and released only after the work is complete and the lender has re-inspected the property against the original quotes. You fund the renovation yourself first and are reimbursed. Carrying $65,000 for the three months a kitchen typically takes costs roughly $1,786, which comes off the saving.
How long do I have to finish the work?
Lenders generally want it complete and re-inspected inside about 120 days, though the exact deadline varies. Cosmetic work and a kitchen usually fit; an addition or structural change typically does not. Running past the deadline can mean the advance is withdrawn after you have already spent the money, so get the deadline in writing before committing to a scope.
Do I need contractor quotes before closing?
Yes. Written quotes are required before the financing is finalised — an estimate you produced yourself will not be accepted, because the programme is underwritten against a specific documented scope and the re-inspection is checked against exactly that scope.
Next step
Ask which version of the programme you would actually get.
Not every lender offers this, the caps differ between the ones that do, and the prepayment privileges decide whether the saving survives your amortization. All three are questions to settle before you commit to a renovation budget rather than after the quotes are signed. Mortgage Directory lists licensed brokers across Canada — placement is never sold, and an enquiry goes to one broker only.