How Does a Home Improvement Mortgage Work?

How Does a Home Improvement Mortgage Work?

For most people, purchasing a home will be the biggest single investment that they ever make. But what if the homes that you are considering are in need of some renovation? If you have to pay out of pocket for renovations right after you buy the home, it can leave you cash strapped. Fortunately, there is a program called the CMHC Improvements Mortgage that allows you to borrow as much as 10% of what the home would be worth after your intended home improvements are made. This home improvement mortgage therefore not only helps you purchase the home, but it helps you pay for necessary renovations and improvements.

How the CMHC home improvement mortgage works:

Say for example, that you are interested in a home that is in need of a kitchen renovation. The house is valued at $200.000 but the value after a kitchen renovation is estimated to be $225,000. If approved for a home improvement mortgage, you could borrow 10% of the new value ($22,500) to put toward the renovation in addition to what you borrow to purchase the home.

In order to participate in the program, prospective home buyers must provide both their lender and CMHC with a quote from a contractor on the proposed renovations before they close on the house. Both the lender and CMHC will need to approve the amount before it can be added to the mortgage loan.

When the home is closed on, the renovation portion of the loan is advanced to the buyer’s lawyer who will hold onto it until the renovations are complete. Since the buyer actually get the cash until renovations are done, it is a good idea for them to get an unsecured line of credit which they can use in the interim.

What is not included in a home improvement loan?

If you are considering a home improvement loan, it is important to note that there are a few things that CMHC will not approve. These include new appliances, and furnace replacement. Lenders will also generally not approve adding another unit to the home such as a basement apartment.

Contact Matrix Mortgage Global today!

If you are interested in learning more about home improvement mortgages and how you can apply for one, contact Matrix Mortgage Global today!


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