Borrower guides
Purchase Plus Improvements Mortgages in Niagara
Niagara's wartime bungalows and century homes are often priced for the work they need. A purchase plus improvements mortgage adds renovation money to an insured mortgage at 5% down. Here is how the caps, holdback and appraisal work.
Reviewed November 13, 2026 · Indicative figures, OAC
What a purchase plus improvements mortgage does
A purchase plus improvements mortgage (often shortened to PPI or "purchase plus") lets you borrow for the house and for planned renovations in one mortgage, at one mortgage rate. The lender bases the loan on the as-improved value, meaning what an appraiser says the home will be worth once the work is done. The renovation money is not paid to you on closing day. It is advanced to your real estate lawyer, held in trust, and released once the work is complete and confirmed.
It suits a lot of Niagara housing stock: post-war bungalows in Merritton and Chippawa, older brick homes in Welland and Port Colborne, and century homes in Old Glenridge, where the price reflects a dated kitchen, an old roof or original windows.
- Typical improvements cap
- about 10% of as-improved value
- Minimum down, $515,000 total cost
- $26,500
- $40,000 of work adds about
- $191/month
- Same $40,000 as a 5-yr personal loan
- $850/month
How much renovation can you add?
Limits depend on the lender and, on insured files, the default insurer. A common rule is that improvements can be up to about 10% of the as-improved value. Some lenders and insurers instead set dollar caps, or set a lower threshold below which a simple contractor quote is enough and a higher one above which they want more detail, inspections or staged draws. Conventional purchase plus improvements files with 20% or more down are sometimes allowed larger budgets. Ask before you write an offer, because the cap decides how much work you can finance.
On an insured file, the minimum down payment is calculated on the purchase price plus the improvements, not on the price alone, and the total must stay under the $1.5 million insured cap.
| Usually accepted | Often excluded or limited |
|---|---|
| Kitchens and bathrooms | Furniture and appliances that are not built in |
| Roof, windows, doors, siding | Pools and hot tubs |
| Furnace, air conditioning, insulation | Landscaping beyond basic grading |
| Electrical updates (including replacing knob-and-tube) and plumbing | Work you plan to do yourself without a quote |
| Flooring, drywall, basement finishing | Major additions needing a construction mortgage |
Worked example: a wartime bungalow in Port Colborne
Worked example: $475,000 price plus $40,000 of work
A first-time buyer buys a 1950s bungalow in Port Colborne for $475,000. Written quotes total $40,000 for a new roof, windows and an electrical update. The appraiser values the home at $515,000 as-improved, so the improvements are 7.8% of that value, inside a 10% cap ($51,500). They take a 30-year insured amortization at an indicative 4.29%.
| Item | With $40,000 of improvements | As-is, no improvements |
|---|---|---|
| Total cost used for the mortgage | $515,000 | $475,000 |
| Minimum down payment | $26,500 | $23,750 |
| Mortgage before insurance | $488,500 | $451,250 |
| Insurance premium (4.20%, 30-year) | $20,517 | $18,952.50 |
| Total mortgage | $509,017 | $470,202.50 |
| Monthly payment, 4.29%, 30 years | $2,505 | $2,314 |
Minimum down on $515,000 is 5% of $500,000 ($25,000) plus 10% of $15,000 ($1,500). The improvements cost $191 a month more on the mortgage and $2,750 more down. Financed instead as a $40,000 personal loan at an assumed 9.99% over five years, the payment would be about $850 a month, with about $10,981 of interest over the five years. Spreading $40,000 over 30 years does mean more total interest, so use your prepayment privileges once the work is done if you can.
Cash at closing: $26,500 down, $1,641.36 sales tax on the premium (8%, not financeable), Ontario land transfer tax of $5,975 less the $4,000 first-time buyer refund ($1,975), and about $1,850 in legal costs, for $31,966.36 before the inspection. Land transfer tax is calculated on the $475,000 purchase price, not the improved value; the calculator above uses the $515,000 total, so it shows slightly higher land transfer tax.
The holdback: the part buyers misunderstand
The lender advances the improvement money to your lawyer at closing, but your lawyer holds it in trust until the work is finished. The lender then sends an appraiser or inspector to confirm completion, and the funds are released, usually to you or directly to the contractor. Most lenders expect the work done within about 90 to 120 days of closing; check your commitment.
Permits matter too. Roofing and windows often do not need one, but electrical, structural and plumbing changes usually do, and creating a basement apartment certainly does. Check with the municipality before work starts. If your plan is a legal secondary suite rather than renovations, the rules are different: see duplex and secondary suite mortgages.
Documents and timeline
Expect to provide the agreement of purchase and sale, your normal income and down payment documents, and written, itemized quotes from contractors on their letterhead, with HST and contact details. The lender orders an appraisal that states both the as-is and as-improved values. Leave time in your financing condition: a purchase plus file needs the quotes before the appraisal can be ordered, so ask for quotes during your inspection period. Seven to ten business days of financing condition is tight; ask your agent for more if the market allows.
Step by step
- Check the lender's improvement cap before you make an offer, so you know how much work you can finance.
- Get a home inspection and quotes during the condition period. Itemized, written quotes from contractors you would actually hire.
- Get a home insurance quote for the property in its current state.
- Submit quotes for the as-improved appraisal, and confirm the value supports price plus improvements.
- Close and start work, paying the contractor's deposit from your own funds or a line of credit.
- Request the completion inspection so your lawyer can release the holdback. Start your file at pre-approval and read the first-time buyer guide.
Frequently asked questions
How much renovation money can I add to my mortgage when I buy?
It depends on the lender and default insurer. A common limit is up to about 10% of the as-improved value, and some lenders use set dollar caps or ask for more documentation above a threshold. On a home appraised at $515,000 as-improved, a 10% limit allows up to $51,500 of improvements.
Can I do a purchase plus improvements mortgage with 5% down?
Yes, on an insured file. The minimum down payment is calculated on the purchase price plus the improvements. For a $475,000 home with $40,000 of work, that is $26,500 rather than $23,750.
When do I get the renovation money?
After the work is done. The improvement funds are held in trust by your lawyer and released once the lender's appraiser or inspector confirms completion, usually within about 90 to 120 days of closing depending on the lender. You need your own funds or a line of credit to pay deposits and progress payments in the meantime.
Can I do the renovations myself?
Most lenders want quotes from contractors and will only finance the cost shown on those quotes. Some accept a homeowner doing part of the work if materials are itemized, but labour you do yourself is usually not financed. Work that needs a permit must be done to code either way.
What happens if the renovation costs more than the quote?
The lender releases only the amount it approved, so any overrun is paid from your own funds. Build a contingency into your savings, and ask contractors for fixed-price quotes where possible.
Pre-approval & rate review
Get your Niagara mortgage numbers checked
Tell us where you are buying or what you owe. We reply by email, usually within one business day, with options from across the lender tiers.
- A licensed advisor reviews your numbers against A-lenders, Ontario credit unions and alternative lenders.
- Rate holds of up to 120 days on purchases and renewals (lender-dependent).
- On prime files the lender pays the brokerage, so there is no fee to you; any fee on alternative or private files is disclosed in writing first.
- Nothing goes to a lender or credit bureau until you say so.
Prefer email? Write to hello@mortgageniagara.com.