Question

What is "Purchase plus improvements" in the context of mortgage financing, and when does it typically require CMHC approval and mortgage default insurance?

A) Purchase plus improvements involves buying a property with no need for additional financing.
B) Purchase plus improvements is a type of mortgage insurance.
C) Purchase plus improvements refers to financing a home purchase along with funds for renovation or improvements.
D) CMHC approval and mortgage default insurance are never required for "Purchase plus improvements" mortgages.

Answer 1

Purchase plus improvements in mortgage financing refers to financing a home purchase along with funds for renovation or improvements. CMHC approval and mortgage default insurance are typically required when the total cost of the mortgage and the renovations exceed a certain threshold.

Step-by-step explanation:

Purchase plus improvements in the context of mortgage financing refers to financing a home purchase along with funds for renovation or improvements. It allows homebuyers to invest in improvements to the property at the time of purchase, instead of having to finance them separately later on.

CMHC (Canada Mortgage and Housing Corporation) approval and mortgage default insurance are typically required for Purchase plus improvements mortgages when the total cost of the mortgage and the renovations exceed a certain threshold, usually a percentage of the property's value. This threshold varies depending on the specific lender and the policies of the CMHC.

For example, if a homebuyer wants to purchase a property for $200,000 and budget an additional $50,000 for renovations, the total cost of $250,000 may exceed the threshold set by the lender or CMHC, requiring the homebuyer to obtain CMHC approval and mortgage default insurance.