🧱 What Is a Purchase Plus Improvements Mortgage?

A PPI mortgage allows buyers to add renovation costs to their mortgage at the time of purchase, instead of paying out of pocket after closing.

It's ideal for:

Homes that need cosmetic upgrades

Properties with outdated kitchens or bathrooms

Homes requiring minor repairs

Buyers who want to customize their own living space

Situations where cash for renovations are limited

The key benefit - You finance the improvements at mortgage rates; not credit card or line-of-credit rates

Lenders generally allow improvements that add value to the home.

✔️ Commonly approved

Kitchen updates

Bathroom renovations

Flooring

Roofing

Windows & Doors

Paint

Basement finishing

Decks & Patios

Energy-efficient upgrades

❌ Typically not approved

Landscaping

Pools or hot tubs

Luxury upgrades

Structural changes requiring permits (varies by lender)

If the improvement increases the home's value and is fixed to the property, it usually qualifies as long as the client does.

📋 How the PPI Process Works (Step‑by‑Step)

1. Quotes are obtained before the offer

The buyer needs written contractor quotes outlining

- The work to be done

- The Cost

- Materials included

These quotes outline how much can be added to the mortgage.

2. Submit the quotes with the mortgage application

The lender reviews:

- The purchase price

- Improvement cost

- Final 'as-improved' value

Most lenders allow up to 10-20% of the purchase price for improvements (varies by lender).

3. Close on the home

The mortgage funds as usual; but, the improvement money is held back by the lender or lawyer.

4. Complete the renovations

Once the work is complete:

- An inspector or appraiser confirms the improvements

- The lender allows the release of the held-back funds from the lawyer to the buyer

This process reimburses the buyer for the renovation costs.

💡 Example Scenario

Purchase price: $600,000

Renovation quotes: $25,000

Total mortgage amount: $625,000 (minus down payment)

The buyer completes the renos after closing and once the lender verifies the work has been completed; the $25,000 is released back to the client.

🧠 Tips to Help Clients Succeed With PPI

✔️ Get quotes early

Contractors get busy; having quotes ready makes the offer stronger

✔️ Stick to the approved scope of the project

Lenders only reimburse the amount that was quoted and held back

✔️ Keep receipts & photos

They assist with the inspection and fund release process

✔️ Choose improvements that add value

Kitchens, bathrooms, flooring and energy updates are the biggest wins

✔️ Understand the temporary cash flow

Clients will need to cover the reno cost upfront until the release of funds

🏡 Why PPI Is a Smart Strategy in Today’s Market

- Updated homes are expensive - PPI lets buyers create value instead of paying for it

- It opens up inventory by making 'almost perfect' homes viable

- Renovations financed at mortgage rates are far cheaper than using credit

- Buyers can personalize their home from day one

For many clients, PPI is the difference between settling for a home and creating the home they actually want.

📞 How Mortgage Foundations Helps

Mortgage Foundations helps guide homeowners through the entire Purchase Plus Improvements mortgage process

Client support includes:

- Reviewing quotes

- Structuring the mortgage

- Choosing lender-friendly improvements

- Understanding cash flow

 

Our expertise makes the process smooth, predictable and stress-free for our clients.