How to Roll a Renovation Into Your Purchase Mortgage

What CMHC Improvement actually is

Most renovation financing assumes you already own the home. CMHC's Improvement program — the insurer's name for what's often marketed as a purchase-plus-improvements mortgage — works at the purchase stage instead. It insures a single mortgage sized against the home's value after planned renovations are complete, called the 'as-improved' value, rather than the price on the listing.

In practice: a buyer finds a home that needs work, gets a contractor's quote for the renovation, and the lender has the property appraised on an as-improved basis. The mortgage is then sized against that higher, finished-value number — with the renovation cost added into the loan rather than paid for separately out of pocket after closing.

How much of the renovation you can actually finance

Because this is an insured mortgage program, it's built for buyers putting down less than 20%. CMHC's published minimum equity requirements are 5% on the first $500,000 of lending value and 10% on the remainder for a one- or two-unit owner-occupied property, with insured financing reaching up to 95% of the as-improved value. Three- or four-unit properties need 10% minimum equity and are capped at 90% financing; a small rental property needs 20%.

Worked through on a simple example: a home listed at $500,000 with a $50,000 renovation quote gives an as-improved value of $550,000. On the first $500,000, the minimum equity is 5% ($25,000); on the remaining $50,000, it's 10% ($5,000) — a total minimum equity requirement of $30,000 against the $550,000 finished value, with the rest financed into the one mortgage.

Two things that example doesn't show are worth adding. The first is the mortgage loan insurance premium itself, which CMHC describes as a one-time charge that may be added to the insured loan amount rather than paid up front — but in Ontario, the provincial sales tax on that premium is payable at closing and cannot be rolled into the mortgage. The second is that a larger renovation scope raises the as-improved value the appraiser has to actually support; a quote that assumes a finished value the market won't back is where these applications tend to come apart.

Single advance or progress advances

How the renovation funds actually reach you depends on the size of the job relative to the finished value. When improvement costs come to 10% or less of the as-improved value, CMHC's rules allow the lender to release the funds in a single advance. Above that threshold, the money is released in progress advances instead — tied to inspections as the work is completed.

CMHC will validate up to four progress advances at no cost under what it calls Full Service; lenders can also validate advances themselves without CMHC pre-approval under Basic Service. Either way, the structure exists to protect the lender's security while the property is mid-renovation — which is also, in practice, what protects you from paying a contractor in full before the work is done.

What kind of renovation tends to qualify

Lenders generally want a firm, itemized quote from a licensed contractor before the mortgage is finalized, since that quote is what the as-improved appraisal is built around. A rough estimate or a plan to do the work yourself over time doesn't fit the structure the same way — the program is built around a defined scope of work with a defined cost, not an open-ended project. CMHC's own materials note that energy-efficient upgrades in particular are well suited to the program, and buyers pursuing them may also be eligible for a partial refund on their mortgage loan insurance premium through CMHC's Eco Products.

The specifics — which upgrades an appraiser will actually credit toward as-improved value, and how a given lender handles the paperwork — vary enough by property and lender that they're worth confirming on the actual home in question rather than assuming from a general rule.

The alternative is usually waiting

Without this structure, a buyer who wants the same renovation typically has two choices: save up and pay for the work out of pocket after closing, which can mean living in an unfinished space for months or longer, or take out separate financing once they own the home — a personal loan, a line of credit, or a refinance once enough equity exists. Rolling the renovation into the purchase mortgage avoids that gap entirely, at the cost of the upfront paperwork, the appraisal timeline and the ceilings described above. Which route makes sense depends on how badly the work is needed, how much cash is available at closing, and what the rest of the mortgage math looks like — a question worth running with actual numbers rather than assuming one option is automatically better.

How this plays out on an actual offer

The practical sequence is: find the property, get a contractor's quote before finalizing financing (not after), and have your mortgage professional confirm the as-improved appraisal and advance structure before the offer becomes firm. Waiting until after closing to figure out the renovation financing usually means losing access to this structure entirely — it's a purchase-time program, not something added on later. See Purchase Plus Improvements for how TFC structures this for Ontario buyers.