Buyer Guide · Updated October 2026
Buying a Home That Needs Work
Written by the Turner Realty Team · Reviewed October 2026
Found a home with good bones that needs updating or repairs? A purchase-plus-improvements mortgage lets you borrow for the home and the work together. Here is how it works, what changes between a small and a major project, and what to ask your lender before you write an offer.
What It Is
Normally a lender looks at the price of the home and lends against that. If the home needs work, you would then find the renovation money somewhere else: savings, a line of credit, a second loan. A purchase-plus-improvements mortgage folds the planned work into the same mortgage as the purchase, so you have one loan and one payment.
Mortgage default insurers offer this as a standard product. CMHC calls theirs CMHC Improvement; Sagen calls theirs Purchase Plus Improvements. Lenders can also have their own versions, and the details differ, so treat this page as a map and your lender as the source for your numbers.
Who It Suits
Cosmetic updates
Paint, flooring, a new kitchen or bathroom, fixtures, light fixtures: the home is sound and you want it to feel like yours. These projects tend to be modest next to the home's value, which keeps them on the simpler side of the table below.
Repairs your inspection turns up
Sometimes the inspection is what sends you here: an aging roof, tired windows, an old furnace, wiring or plumbing that needs attention. Rather than walking away or asking the seller to fix everything, you can price the repairs, then ask your lender whether they can be built into the mortgage. Your home inspection and the contractor quotes that follow it become the backbone of the request.
Not a fit for everyone
If the work is major, such as an addition or taking a house down to the studs, you are closer to a construction financing conversation. If the home is not yet safe or liveable, a lender may not be able to finance it at all. Your agent and your lender can tell you which side of that line a particular house falls on.
How It Works, Step by Step
- Talk to a lender before you shop for the house. Say up front that you want to finance improvements, so your pre-approval is built around the right product.
- Find the home and get quotes. Have your inspection done and collect written quotes from the contractors who would do the work. Lenders and insurers want to see what the work is and what it will cost.
- Submit the offer and the renovation plan to your lender. The lender, and the insurer if the mortgage is insured, reviews the purchase, the planned work and the expected value of the home once the work is finished (the as-improved value).
- Close and get the keys. The purchase closes as usual. The improvement funds stay with the lender.
- Do the work. The improvement money is advanced as the work is done, and the lender confirms completion first. Sagen’s page, for example, says the lender checks completion with documents such as a third-party report or photos.
- The held-back funds are released. For a smaller project this may be a single advance; larger projects are advanced in stages. See the comparison below.
Small Project or Major Renovation?
The dividing line the insurers use is the cost of the improvements compared with the as-improved value of the home, meaning what it is expected to be worth when the work is finished. It is not compared with the purchase price.
| Small project | Major renovation | |
|---|---|---|
| Size of the work | Improvement costs up to 10% of the as-improved value | Improvement costs above 10% of the as-improved value |
| How funds are advanced | A single advance (CMHC) | Progress advances, in stages as work is completed (CMHC); draws managed by Sagen apply above the 10% mark |
| Oversight | Lender confirms the work was done | Advances are validated along the way; CMHC’s Full Service option covers up to 4 consecutive advances, and its Basic Service leaves validation to the lender |
| What to expect | Simpler paperwork, faster | More paperwork and more steps; plan the schedule around the advances |
| Typical examples | Paint, flooring, kitchen or bath refresh, a roof or windows on a modestly priced home | Large renovations, structural work, work that is big next to the home’s value |
Which side a project lands on depends on the as-improved value your lender or insurer arrives at, so a $20,000 project can be small on one home and major on another. The examples are illustrations, not rulings.
A Worked Example, and a Calculator
Say a home is priced at $100,000 and needs $10,000 of work. Add them: $100,000 + $10,000 = $110,000. A 5% down payment on $110,000 is $110,000 × 0.05 = $5,500, which leaves a mortgage of $104,500. Of that, $10,000 is the improvement money the lender holds back until the work is done. Compare the work with the total: $10,000 ÷ $110,000 is about 9.1%, under the 10% line, so on CMHC’s fact sheet this would be a small project with a single advance.
Try your own numbers. The total here stands in for the as-improved value, which your lender will confirm with its own appraisal, so treat the results as a rough guide.
Purchase plus improvements estimate
| Total (price + work) | |
|---|---|
| Down payment at 5% of the total | |
| Down payment at 10% of the total | |
| Down payment at 20% of the total | |
| Minimum down payment under the 5% / 10% rule* | |
| Held back for the work (advanced as it is completed) | |
| Work as a share of the total |
* CMHC’s fact sheet and Sagen’s page both describe a minimum of 5% on the first $500,000 and 10% on the rest for owner-occupied purchases. Insured mortgages also have price limits, and rules change, so your lender confirms the real minimum. The down payment is worked out on the lending value, which can be lower than the total if the appraisal comes in low.
Estimates only. No interest rate is used and nothing here is an approval or a quote. For your closing-day cash needs on top of the down payment, see our closing cost calculator.
Questions to Ask Your Lender
- Do you offer a purchase-plus-improvements mortgage, and is it insured by CMHC, Sagen or neither?
- What improvements count, and what does not? (Sagen’s page, for instance, rules out furniture, appliances and other moveable items.)
- Is my project a single advance or progress advances? How many advances, and what proof do you need for each?
- How do you work out the as-improved value, and who orders the appraisal?
- How is my down payment calculated, and what happens if the appraisal is lower than my price plus work?
- Do I need written contractor quotes before approval? Can I do some of the work myself?
- Is there a time limit to finish the work, and what are the fees for the program?
- What happens to the interest on the held-back money before it is advanced?
How Your Agent Helps
A mortgage specialist sets the financing; your Turner agent helps with everything around it:
- Spotting homes where the work is a good trade for the price, and homes where it is not.
- Writing the offer with the right conditions, including time for the inspection, financing and the quotes you need.
- Lining up the inspector and showing you the issues that matter.
- Keeping the timeline workable so your lender has what it needs before the conditions come off. Our buying process guide shows where each step falls.
We do not set lender terms or give financial advice. Your agent will point you toward people who do.
Common Questions
What is a purchase-plus-improvements mortgage?
It is a mortgage that lends enough to buy the home and pay for planned improvements, so you carry one mortgage instead of a mortgage plus a separate renovation loan. The improvement money is advanced after closing, as the work is done. CMHC offers it as CMHC Improvement and Sagen as Purchase Plus Improvements, and lenders may have their own versions.
Is it only for big renovations?
No. CMHC treats improvements of up to 10% of the as-improved value as a small project that is advanced in a single advance. Larger projects are advanced in stages. Both are described on CMHC's fact sheet.
Does the 10% figure use the purchase price?
No. On CMHC's fact sheet the 10% threshold is measured against the as-improved value, which is what the home is expected to be worth once the work is finished, not against the purchase price.
Is my down payment based on the purchase price or the finished value?
Neither exactly. CMHC bases the down payment on the lending value, which it describes as the lower of the market value and the purchase price plus the cost of the work. The as-improved value is what sets the maximum loan.
Will I be approved?
We can't promise that, and neither can a website. Approval depends on you, the property, the work you plan and the lender and insurer involved. A lender can tell you what is possible for your situation, and terms vary by lender and insurer.
Learn More
Lender and insurer information, for reference only. These links are not recommendations, and we have no say in what any lender offers.
- CMHC Improvement fact sheet (PDF, June 2021 edition)
- Sagen: Purchase Plus Improvements
- RBC: construction mortgages, for major renovation and build projects
- RBC: mortgage specialist locator
Facts on this page about the 10% line, advances, lending value and as-improved value come from the CMHC fact sheet (the June 2021 edition, which says it is subject to change). Facts about lending value, ineligible items, completion checks and minimum down payment also appear on Sagen’s page. Both read October 6, 2026.
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This guide is for general information only. It is not financial, mortgage, tax or legal advice, and it is not an offer or approval of any kind. Program terms, limits and eligibility vary by lender and by insurer, and they change. Confirm everything with your lender or mortgage professional before you rely on it. Royal LePage Turner Realty does not provide financial or mortgage advice.