A client, David, is purchasing a home in Calgary for $600,000 and needs to replace the furnace and upgrade the kitchen immediately after closing. He has qualified for a mortgage based on the $600,000 purchase price but doesn't have the cash for the improvements. The estimated cost for these renovations is $30,000. What is the most appropriate mortgage solution for David?

Question: A client, David, is purchasing a home in Calgary for $600,000 and needs to replace the furnace and upgrade the kitchen immediately after closing. He has qualified for a mortgage based on the $600,000 purchase price but doesn't have the cash for the improvements. The estimated cost for these renovations is $30,000. What is the most appropriate mortgage solution for David?

Answer options:

• A line of credit to be secured after closing, separate from the mortgage. ✅ A Purchase Plus Improvements mortgage, allowing the renovation costs to be added to the mortgage principal.
• A second mortgage to cover the renovation costs, placed after the first mortgage.
• A standard uninsured mortgage, requiring him to find alternative financing for the renovations.

Correct answer: A Purchase Plus Improvements mortgage, allowing the renovation costs to be added to the mortgage principal.

Explanation: A Purchase Plus Improvements mortgage allows recognized renovation costs to be added to the mortgage principal at the time of purchase, subject to lender approval and an appraisal reflecting the post-renovation value. This avoids immediate out-of-pocket expenses for the borrower.