Buying a Fixer-Upper?
How Purchase-Plus-Improvements Financing Works
Fixer-uppers can be one of the smartest ways into a competitive Calgary market, lower purchase price, room to build equity through your own work, and often less competition at the offer stage. The part people usually don't know about upfront is that you don't have to pay for the renovation separately, out of pocket, after closing. There's a mortgage product built specifically for this.
What purchase-plus-improvements actually is
This financing rolls the cost of planned renovations into your mortgage at the time of purchase. Instead of buying the home, closing, and then scrambling to fund repairs separately (often on a credit card or personal loan at a much higher rate), the renovation budget becomes part of your mortgage from day one.
How the process actually works
You get a contractor's quote for the specific work you're planning, before closing.
The lender reviews the quote and typically will finance renovation costs up to a set amount
At closing, the renovation funds are held back rather than paid out immediately the lender wants to see the work actually completed before releasing the money.
You complete the renovations, usually within a set window of time (often 90-180 days).
An appraiser confirms the work is done, and the held-back funds are released to pay the contractor.
Why this matters more than just convenience
The real advantage isn't just avoiding a second loan it's the rate. Renovation costs financed this way ride on your mortgage rate, which is almost always significantly lower than a personal loan, credit card, or even most HELOCs on a brand-new purchase (since you won't have built equity yet to secure a HELOC against). For a $40,000 kitchen renovation, that rate difference alone can be worth thousands over the life of the loan.
What to watch out for
You need a real, itemized quote before closing — vague renovation plans won't satisfy the lender's requirements.
The appraisal is based on projected value, so if your planned renovations don't clearly add value (cosmetic vs. structural, for example), the lender's assessment of what they'll finance may be more conservative than you'd hope.
Timelines matter. If your contractor runs late and you miss the completion window, it can complicate the fund release. Build in buffer room when you're planning the schedule.
The kind of renovations that qualify best
Lenders generally look most favourably on improvements that clearly and measurably increase a home's value; kitchens, bathrooms, structural repairs, updated electrical or plumbing, energy efficiency upgrades. Purely cosmetic changes (paint, minor fixtures) can sometimes be included but tend to carry less weight in the appraiser's post-renovation valuation, so it's worth being strategic about what you prioritize if you're working within a financing cap.
How this fits into your overall offer strategy
Because this type of financing needs to be arranged before closing, it's worth discussing with your broker at the same time you're getting pre-approved, not after you've already found the property. Knowing in advance that this option is available can also change what kind of homes you're willing to consider a fixer-upper that looked out of reach on paper might actually be very workable once renovation financing is factored into the plan from the start.
FAQ
Can I use purchase-plus-improvements financing on any type of property? It's most commonly used on single-family homes and can sometimes apply to condos, though condo corporations may have their own restrictions on renovation work that need to be checked first.
What happens if my renovation costs less than what was financed? Typically any unused held-back funds are simply not released and get applied to reduce your mortgage principal, rather than being paid out to you directly.
Do I need to use a licensed contractor? Most lenders require quotes from a licensed, insured contractor for the funds to qualify — DIY renovation budgets can be eligible in some cases for materials only.
The bottom line
If you're eyeing a home that needs work, don't assume you're stuck choosing between paying cash for renovations or taking on high-interest debt after closing. Purchase-plus-improvements financing exists specifically to fold that into your mortgage — it just needs to be arranged before you close, not after.
Looking at a fixer-upper and want to know if this financing fits? Reach out before you write your offer timing matters here.
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