If you’re a new home buyer, you probably have a lot of considerations in mind, such as where you want to live, or how big you want your home to be. Some buyers also wonder if they should consider purchasing a fixer-upper. This type of purchase puts the buyer in charge of restoring an old, abandoned, or foreclosed home and making it liveable once again. For some people, this is an intriguing and exciting project. Before committing to this type of purchase, however, here’s what you need to think about.

Budgeting for the purchase and repairs

The biggest item to consider when purchasing a fixer-upper is how to budget for it. This is a tricky purchase, because the price of the property itself is likely to be low. However, the expenses required to restore the home to a liveable condition are often steep. It’s not uncommon for people to buy a fixer-upper in the hopes of saving money, just to end up spending more on repairs than if they’d purchased a move-in ready home. It’s important to be realistic about your budget with this type of purchase. If you’re trying to save money, careful budgeting is critical. Otherwise, be prepared to accept the possibility of a pricier overall purchase.

The costs associated with a fixer-upper vary by property, depending on its size and the extent of repairs needed. Many common repairs include roofing, foundation, and plumbing, along with more superficial upgrades to appliances and flooring. A home inspection is a good way to determine what needs the most attention, and how much it might cost.

How you will secure mortgage financing

When it’s time to think about mortgage financing for a fixer-upper, borrowers may want to consider Purchase Plus Improvements (PPI) programs. These programs are designed to help buyers who need to complete home renovations right after purchasing the property. If you’re buying a fixer-upper, this will certainly apply to you! With this type of mortgage, the renovation expenses are combined with the home’s purchase price. This allows buyers to take on large home improvements more affordably. Each of the three default insurers have PPI programs in Canada. These are Sagen, Canada Guaranty, and the Canada Mortgage and Housing Corporation (CMHC). Each has a slightly different program so you will want to speak with your mortgage broker in more detail to determine which is best for you!

Making big renovation decisions

For some people, the idea of renovating a home from scratch is a dream, while for others it’s just overwhelming. Purchasing a fixer-upper means you will be responsible for making renovation decisions and remodeling the house. Once the necessary repairs are completed and the house is useable, a fixer-upper property will probably need some superficial love as well. The walls, flooring, counters, cabinets, bathrooms, and the kitchen are some of the items that will require your attention. Consider how comfortable you are making decisions about how to revamp an entire house. You can always bring in outside help, and contractors who do the work can offer their opinions. However, the ultimate decisions will be up to you!

What will you use the property for?

What are your plans for this property? Will you be moving in, or do you want to rent it out as a form of passive income? This will influence a few of your decisions along the way to restoring the home. If you want to make the house yours, you should be sure to have alternative living arrangements set up well in advance. Major renovations such as these almost always run into delays at some point. It’s important to have somewhere else you can stay long-term so you won’t be stuck without a place to live! If you’re planning to rent the home out and become a landlord, this might affect some of your renovation decisions. Of course, you need to make the home liveable, but you probably don’t need to go all-out on the finest materials and decor. For example, the kitchen will still be perfectly functional if you opt for laminate countertops instead of marble, or if you install a smaller shower instead of a grand bathtub in the bathroom. The key is to find the balance between saving some money on materials while still making the home appealing to renters.

Using the right professionals

Finally, it’s critical to get in touch with the right professionals early in the process! If you’re considering making this type of purchase, start researching potential real estate agents who might have experience with fixer-uppers. They will be best suited to help you find the right property and submit the best offer. You will also want to get in touch with a mortgage broker early on! Since this is a unique type of purchase that will likely require a different form of financing, using a broker will give you a big boost. We can help you find the right lender who can offer you the best product and rate for your purchase. It’s much easier to secure the proper financing with a broker on your team, given our wide range of access to a variety of potential lenders.

Purchasing a fixer-upper is a big decision that requires very careful consideration. There are several moving parts to think about, and it is a long-term project and commitment. It’s important to be certain that this is the right decision for you before you dive in. If you think a fixer-upper could be in your future, feel free to reach out! We can get you started on the right track to make your experience as easy as possible.

If you have any questions about your mortgage, get in touch with me!