Purchase Plus Improvements Mortgage in Canada: How to Fund Your Renovation on Closing Day (2026 Guide)
Here's a scenario I've seen play out a hundred times. A buyer falls for a home in Mount Pleasant or Forest Lawn that ticks every box — right neighbourhood, right yard, right bones — but the kitchen is straight out of 1987 and the bathroom hasn't been touched since Pierre Trudeau was Prime Minister. They love the house, hate the finishes, and assume they'll have to wait years to renovate. So they walk away, or they buy it and stack $40,000 of renovation costs onto a line of credit at 9.5% interest.
There's a better option, and most Alberta buyers have never heard of it. It's called a Purchase Plus Improvements mortgage, and it lets you roll your renovation costs directly into your mortgage at the time of purchase — same low rate, same amortization, no separate loan. Let's break this down so it actually makes sense, because if you're house-hunting in Calgary right now, this might be the missing piece.
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What Is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements (PPI) mortgage is exactly what it sounds like — a mortgage that includes both the purchase price of the home and the cost of immediate renovations, financed together at your regular mortgage rate.
Three default-insurers in Canada offer this program: CMHC (under their Improvement product), Sagen (Purchase Plus Improvements), and Canada Guaranty (Purchase Advantage Plus). All three follow similar rules, with the same down payment minimums as any insured mortgage — 5% on the first $500,000 of the as-improved value, and 10% on the portion between $500,000 and $1.5 million.
Why does this matter right now? Calgary's average home price hit $651,895 in April 2026, and that's after a year of softer conditions, with the benchmark down 3.5% year-over-year. Move-in-ready homes are still moving fast. The homes that aren't move-in-ready are sitting longer and selling for less. That's where buyers willing to renovate have leverage. PPI is what lets you walk in with an offer that beats the move-in-ready crowd, because you're buying the bones and funding the finishes through one mortgage.
This isn't a renovation loan, a HELOC, or a second mortgage. It's one mortgage, with the renovation amount built in. You qualify once. You pay one rate. You move in, do the work, and the lender releases the renovation funds when the work is complete.
How It Works: From Offer to Final Draw
Here's the actual mechanics, in order:
Step 1: Quotes before the offer. Before you write an offer that includes a PPI clause, you need at least one written renovation quote (sometimes two) from a licensed contractor. The quote needs to list the scope — kitchen cabinets, countertops, flooring, paint, plumbing fixtures, whatever it is — and a real total cost.
Step 2: As-improved appraisal. The lender orders an appraisal that values the home in two states: as it is today, and as it will be once the renovations are complete. The "as-improved" value is what your mortgage is built around.
Step 3: Mortgage approval. Your mortgage closes for the purchase price plus the approved renovation amount. So if the home is $550,000 and your renovations are $40,000, your mortgage is structured around the $590,000 as-improved value. Down payment is calculated on that as-improved value, not the original list price.
Step 4: Closing day. You take possession of the home. The purchase portion funds normally and goes to the seller. The renovation portion — your $40,000 — is held back by the lender in trust. You do not get this money up front.
Step 5: Pay the contractor yourself first. This is the part that catches most buyers off-guard. You have to front the renovation money. Most clients do this with a line of credit, savings, or a short-term loan. The work has to be done by a licensed contractor with proper invoices and receipts.
Step 6: The draw. Once the work is complete (or the lender's chosen milestone is hit), you request a draw. The lender sends an appraiser back, confirms the value matches the original quote, and releases the renovation funds to reimburse you.
Maximum renovation budgets under PPI: CMHC and most insurer programs cap improvements at the lesser of 20% of the as-improved value or roughly $40,000 in the simplest single-draw version. Sagen's larger draw-managed program allows improvements greater than 10% of the as-improved value with structured progress draws, useful for bigger renos. Your broker will match the insurer to the scope of work — this is where having someone in your corner who knows the lender landscape genuinely matters.
Who Qualifies in Alberta
The PPI program isn't reserved for first-time buyers. Anyone who qualifies for a standard insured Canadian mortgage qualifies for PPI. That said, there are real boxes to check:
Property type. Owner-occupied 1–2 unit dwellings up to 95% loan-to-value (5% down on the first $500K of as-improved value). Owner-occupied 3–4 unit dwellings cap at 90% LTV (10% down). Pure rental properties are not eligible for the insured PPI program.
As-improved value. Must be under $1.5 million to qualify for default insurance, following the December 15, 2024 federal rule change that raised the insured cap from $1 million to $1.5 million. Above $1.5M, you're in uninsured territory and will need 20% down — PPI in that case is a different conversation, but still possible.
Credit and income. Same stress test as every Canadian mortgage in 2026 — you qualify at the contract rate plus 2%, or 5.25%, whichever is higher. With 5-year fixed rates currently sitting around 4.0–4.3%, the operative qualifying rate is roughly 6.0–6.3%. The renovation amount counts as part of your loan, so it increases the income you need to qualify.
Down payment. Minimum 5% on the first $500K of the as-improved value, 10% on the portion between $500K and $1.5M. Your down payment can come from savings, the RRSP Home Buyers' Plan, the First Home Savings Account, or a gift — same flexibility as any insured mortgage in Canada.
Amortization. Up to 25 years standard. First-time homebuyers in Canada can access a 30-year amortization on insured mortgages — including PPI — as of December 15, 2024. New build buyers also get the 30-year option regardless of first-time status.
Liquidity. Most lenders want to see proof you can actually pay the contractor before being reimbursed. For renovations over $20,000, expect to show savings or available credit equal to at least 15% of the renovation cost, on top of your closing costs.
Real-Life Example: Maya's Story
🏠 Real-Life Example: Maya's Story
Maya was a 32-year-old project manager who'd been renting in Bridgeland for four years. She had $45,000 saved between her FHSA and a regular savings account, and she was tired of seeing the same tired bungalows in her price range. Move-in-ready homes in her favourite neighbourhoods were $700K-plus. The homes she could afford needed work — and the work was scaring her off.
Here's how we structured her purchase using PPI:
- Purchase price: $550,000 — a 1960s bungalow in Highland Park
- Renovation budget: $38,000 — kitchen gut, main-floor flooring, paint, two bathroom refreshes
- As-improved value: $588,000
- Down payment (5% on first $500K of as-improved + 10% on $88K of as-improved): $25,000 + $8,800 = $33,800
- Insured mortgage amount: $554,200 (including PPI portion)
- 30-year amortization (Maya is a first-time buyer)
- 5-year fixed rate at 4.19% → monthly payment approximately $2,690
On closing day, Maya bought the home and got the keys. She paid her contractor in three milestones using a line of credit she'd set up two weeks earlier. Within 90 days the kitchen was open-concept, the floors were refinished, and both bathrooms were refreshed. The lender sent an appraiser back, confirmed the work matched the original scope, and released the $38,000 directly to Maya, who paid the line of credit off in full.
The outcome: Maya owned a home worth roughly $588,000 in the inner city, with $33,800 down and one mortgage at 4.19%. Her monthly payment was lower than what she'd have paid on a move-in-ready listing two blocks over — and she didn't have to wait three years to start enjoying the kitchen.
Worth knowing: The Appraisal Institute of Canada estimates that a quality kitchen renovation returns 75–100% of its cost in added home value. Used right, PPI lets you capture that value at the same time as you pay for the renovation — instead of waiting years and refinancing later.
Common Mistakes to Avoid
I've helped a lot of buyers through PPI, and the same handful of mistakes come up over and over.
1. Assuming the renovation funds are released on closing. They aren't. You front the money. If you don't have the cash flow or a line of credit available to pay your contractor while you wait for the draw, the deal grinds to a halt. Plan for this before you write the offer, not after.
2. Bringing in unlicensed contractors or "buddies with tools." The lender will not release renovation funds for work without proper invoices from a licensed, insured contractor. Cash deals with your cousin who does flooring on the weekend don't qualify, no matter how good a job he does.
3. Forgetting to include all upgrades in the original quote. Whatever isn't in the renovation budget at funding can't be added later. If you decide mid-renovation that you also want to redo the deck or finish the basement, that's now an out-of-pocket project at line-of-credit rates. Build the full scope in from day one.
4. Underestimating the timeline. Most lenders give you 90 to 120 days to complete the work after closing. Calgary's contractor market is busy, and good kitchen trades can be booked out two months. Line your contractor up before the offer goes in, not after.
5. Doing the work yourself to "save money." Sweat equity sounds clever, but PPI requires invoiced labour. If you DIY, you cannot draw back the cost of your own labour — materials only, and even then you need receipts. For most homeowners this means hiring out is more cost-effective than it looks on paper.
What to Do Next
If you're shopping for a home in Alberta right now and you've been walking past the dated ones, it's time to look at them again with fresh eyes. The Purchase Plus Improvements program is one of the most underused tools in Canadian mortgage financing, and it's especially powerful in markets like Calgary, where the bones-vs-finishes price gap is wide.
Here's how to start: pull together a rough list of what you'd want to renovate in the home you've been eyeing — kitchen, bathroom, flooring, paint, whatever it is. Get a ballpark quote from a contractor. Then book a 30-minute conversation with us and we'll run the numbers on how a PPI mortgage would actually structure for your situation. No pressure, no obligation — just real numbers tied to a real property.
The short answer is yes, you can finance the kitchen of your dreams into your mortgage on day one. The full answer is more interesting — and depends on which insurer you use, what your renovation timeline looks like, and whether the home you're buying makes financial sense after the work is done. That's the conversation worth having before you write the offer, not after.
Thinking about a home that needs a little love?
Let's see if a Purchase Plus Improvements mortgage works for the property you're eyeing.
Fill out an applicationSpire Mortgage Team is licensed with Mortgage Architects in AB, BC, SK (FCAA #316728), and ON (FSRA #12728). This post is for educational purposes only and does not constitute mortgage advice. Rates and program details are subject to change. Contact a licensed mortgage professional for guidance specific to your situation.
