A Purchase Plus Improvements mortgage lets you roll the cost of renovating a home straight into the same mortgage you use to buy it, insured the same way as the rest of the loan by CMHC or Sagen, with the renovation money held back by the lender until the work is done. That’s what “buy the fixer-upper and renovate with the bank’s money instead of your own savings” means in practice, and it’s a real program, not a marketing phrase. This guide covers who insures it, what currently qualifies, how much can be added, and how the timeline works, as one piece of the financing picture our complete Toronto real estate guide covers in full.
If you’ve already read our guide to what CMHC insurance costs, the base premium on a Purchase Plus Improvements mortgage works the same way as any other insured mortgage, covered there rather than repeated here. This program usually comes up around the same point in the process as mortgage pre-approval, once you know roughly what you can spend and start looking at homes that need work. Once you understand what it covers, browse current Toronto listings or see the rest of our guides for everything else a purchase involves.
What it is
A standard mortgage covers the purchase price of a home as it stands on closing day. Purchase Plus Improvements adds a second piece on top: a lender-approved renovation budget, based on a contractor’s quote, folded into the same insured mortgage rather than financed separately after closing with a line of credit or a personal loan. The mortgage amount ends up based on whichever is lower, the purchase price plus the quoted improvement cost, or the home’s appraised value once the improvements are factored in, so the bank is always lending against a number it can defend with an appraisal.
This matters most for a home that needs real work before it’s livable, not cosmetic upgrades you’d do eventually anyway. A buyer choosing between paying for that work out of savings after closing, or folding it into the mortgage at the point of purchase, is the exact decision this program exists to support.
Who insures it, and how it connects to the base mortgage
Both CMHC and Sagen offer a version of this program, under names like CMHC’s own Improvement program and Sagen’s Purchase Plus Improvements Program, and broker sources describe Canada Guaranty offering an equivalent product too. It isn’t a separate loan sitting alongside your mortgage. It’s a feature of the same insured mortgage, so the base premium you already pay for mortgage default insurance, covered in our guide to CMHC insurance costs, applies here the same way it would on any other insured purchase. Nothing about adding the improvement amount changes how that premium itself is calculated, by loan-to-value band.
Sagen’s own program page also caps the loan-to-value ratio at 95% for one- and two-unit properties, the same ceiling that applies to an insured mortgage generally, with the lending value based on whichever is lower, the as-improved property value or the sum of the purchase price plus the direct cost of the improvements. In practice, that means the program doesn’t let a buyer with a minimal down payment stretch into a larger mortgage than the usual insured-mortgage rules would otherwise allow. It adds a renovation budget on top of a normal insured purchase; it doesn’t relax the loan-to-value ceiling that purchase is already subject to.
What’s eligible
The general rule across every lender’s version of this program is the same: the renovation work has to be quoted by a licensed contractor, not priced by the buyer’s own estimate, and it’s generally the buyer’s own DIY labour and materials bought without a quote that don’t qualify. The property is generally expected to be owner-occupied. Lenders want a defined scope of work they can price and verify, not an open-ended renovation budget with no fixed plan. This is the general shape of the rule, not an exhaustive list of which specific jobs qualify, since the exact scope a lender accepts varies by file and by lender.
Submit the contractor’s quote before your mortgage is finalized, not after, since the lender needs it to set the mortgage amount in the first place. If the actual renovation ends up costing more than the original quote, that overrun is on you to cover, not something the lender automatically adds to the mortgage partway through. A buyer who expects the scope to grow once work is underway is better off quoting conservatively on the high side up front than trying to go back to the lender mid-project for more.
How much can be added
Sagen’s own program page states the 10%-of-as-improved-value figure as a disbursement rule, not a cap on the total improvement amount. Once the quoted improvement cost passes 10% of the as-improved value, Sagen requires the lender to release the renovation money as managed progress draws tied to inspections, rather than as a single advance at closing. The total amount you can add for improvements is a separate number. Most broker and lender sources, including WOWA, nesto, LendCity and Craigburn Mortgages, put that ceiling at roughly 20% of the as-improved value, and some of the same sources also cite a $40,000 figure historically paired with that percentage. Neither Sagen nor CMHC states that total ceiling as plainly on its own program page as it states the 10% disbursement rule, and the two insurers aren’t guaranteed to apply an identical number, so get the figure that applies to your specific file and insurer from your lender before you build a renovation budget around it.
How the timeline and holdback work
The renovation portion of the mortgage isn’t handed to you in cash at closing alongside the rest of the loan. The lender holds that money back until the work is complete, which is typically confirmed through a follow-up appraisal or inspection, and only then releases the funds, either to you or directly toward the contractor’s invoices depending on how your lender structures it. Completion windows in the 90-to-180-day range after closing are commonly cited across broker and lender sources, though the exact window is set by the individual lender rather than fixed by CMHC or Sagen themselves, so confirm your own deadline in writing before you commit to a renovation schedule around it.
None of this is a guarantee of approval or a blank-cheque renovation budget. The loan is still fully underwritten, the as-improved value is still set by an appraiser rather than by the contractor’s quote alone, and the lender still has to approve the contractor and the scope of work before any of it gets added to your mortgage.
How this differs from the secondary-suite refinance
This is a different product from the CMHC-insured refinance covered in our guide to paying for a secondary suite, even though both let you borrow against a home’s future value to pay for renovation work. The refinance in that guide is for an existing homeowner adding a secondary suite to a home they already own, arranged after the fact, once they already hold the property. Purchase Plus Improvements is a decision made at the point of buying any home that needs work, whether or not the renovation involves a secondary suite at all, and it’s built into the purchase mortgage from day one rather than arranged afterward as a refinance.
Frequently asked questions
What is a Purchase Plus Improvements mortgage?
It’s a single insured mortgage that covers both a home’s purchase price and a lender-approved renovation budget, rather than requiring the buyer to take out a separate loan after closing to pay for the work. The mortgage amount is based on whichever is lower, the purchase price plus the quoted improvement cost, or the home’s appraised value once the improvements are accounted for. It’s aimed at a buyer who has found a home needing work before it’s livable, and would rather fund that work through the mortgage itself than pay for it out of savings after taking possession.
Who insures a Purchase Plus Improvements mortgage?
CMHC and Sagen both offer a version of this program, and broker sources describe Canada Guaranty offering an equivalent product as well. It isn’t a separate insurance product. It’s a feature added onto the same insured mortgage covered in our guide to CMHC insurance costs, so the base mortgage-default-insurance premium you’d already pay on an insured purchase applies here the same way, calculated by the same loan-to-value bands. Adding the improvement amount doesn’t change how that underlying premium is worked out.
How much can I add to my mortgage for renovations?
The 10%-of-as-improved-value figure named on Sagen’s own program page is not a cap on the total improvement amount. It’s the threshold that decides how the money gets disbursed: below 10% of the as-improved value, Sagen allows the renovation funds to go out as a single advance; above it, the lender has to release the money as managed progress draws tied to inspections. The ceiling on the improvement amount is a different number: about 20% of the as-improved value, with a $40,000 figure cited alongside it by some brokers. Neither Sagen nor CMHC publishes that ceiling as plainly as the 10% rule, and the two insurers need not apply the same figure, so confirm it with your lender for your file.
When do I get the renovation money?
Not at closing. The lender holds the renovation portion back until the work is verified complete, typically through a follow-up appraisal or inspection, and completion windows in the range of 90 to 180 days after closing are commonly cited, though the exact deadline is set by your specific lender rather than fixed universally by CMHC or Sagen. Budget the project on the assumption that you, or your contractor, carry the cost of the work until that verification happens and the funds are released, rather than expecting the money up front alongside the rest of your mortgage.
Does this guarantee my renovation gets approved?
No. The loan is still subject to full underwriting, the lender has to approve both the contractor and the scope of work before any of it is added to your mortgage, and the as-improved value is set by an independent appraiser rather than by the contractor’s quote alone. A Purchase Plus Improvements mortgage changes how the renovation gets paid for. It doesn’t remove the normal approval steps a lender applies to any insured mortgage, and a renovation that an appraiser doesn’t think adds value won’t support as large a mortgage as the contractor’s quote alone might suggest.
Once you know what a Purchase Plus Improvements mortgage covers, the next step is confirming what you can qualify for. Start with mortgage pre-approval, see our guide to CMHC insurance costs for how the base premium works, and browse current Toronto listings with a renovation budget already in mind. See the rest of our guides for everything else a Toronto purchase involves.