Buyers who stretch to close on a house usually discover the same thing in the first month: the renovation budget is gone. The down payment, land transfer tax, legal fees, and moving costs consumed whatever was left, and the kitchen that needed work still needs work. The default answer at that point is a line of credit or a credit card, both of which price renovation at several times the cost of the mortgage that just funded the purchase.
There is a better instrument for this, and most Canadians do not know it exists. According to CMHC's Mortgage Consumer Survey, 38% of Canadians are unaware of the Purchase Plus Improvements mortgage.
The Basic Mechanism
A Purchase Plus Improvements mortgage lets you borrow against the improved value of a property rather than its purchase price. You identify the renovations before closing, price them, and the lender advances funds for both the house and the work in a single mortgage at a single rate.
The practical effect is that a $600,000 house needing $50,000 of work is financed as a $650,000 proposition, at mortgage rates, on a mortgage amortisation, with one monthly payment. Compared to funding that $50,000 on an unsecured line of credit, the interest difference over a few years is substantial.
It suits three situations particularly well: first-time buyers who have exhausted their cash at closing, homeowners renewing who want to fund work at renewal rather than borrow separately, and anyone deliberately buying a property priced below the neighbourhood because it needs work. It requires a solid down payment, and lender appetite tightens as the improvement figure grows relative to purchase price.
How the Process Actually Runs
The sequence matters, because the most common failure mode is discovering the option after the offer is already firm.
Pre-approval, with the renovation included. Work with a mortgage broker before you are shopping seriously, and have the renovation budget in the application from the start. Retrofitting the improvement portion onto an existing approval is possible but slower and less certain.
Purchase. You close on the property in the ordinary way. The mortgage is registered for the full amount, purchase price plus approved improvements, but the improvement portion is not handed to you at closing.
Documentation of the work. To release the improvement funds you supply detailed plans and written quotes from licensed contractors. Lenders want specificity here, which is a useful discipline: it forces the scope conversation to happen before the money is spent rather than after.
Staged release. Funds come out in draws as work is completed, usually with an inspection or an appraiser's confirmation at each stage. This means you or your contractor need to carry the cost of each stage until the draw clears. Plan for that cash flow gap explicitly, because it surprises people.
Completion. Once the final draw clears, the renovation is fully absorbed into the mortgage and you carry one payment.
Why Efficiency Work Is the Strongest Use of It
Any renovation can be financed this way. Not all of them return anything.
Energy efficiency upgrades are unusual in that they reduce the operating cost of the house immediately and permanently. A retrofit that cuts $1,500 a year off energy bills produces a cash flow improvement from the first month, which can be redirected straight into extra mortgage payments. The renovation, in effect, partly funds its own repayment.
They also compound with the mortgage rather than competing with it. Heat pumps, improved insulation, EV charging capability, and battery storage all read as value to the next buyer, particularly to younger buyers who price operating costs into their decision more explicitly than previous generations did. Bathroom finishes date. A tight building envelope does not.
Who Underwrites It
Two names cover most of the Canadian market:
CMHC. The CMHC Improvement programme supports insured lending up to 95% loan-to-value against the improved property value, with the improvement portion itself generally capped around 10% of that as-improved value. It is supported by essentially every major lender.
Sagen. One of Canada's largest private mortgage insurers, Sagen runs a comparable Purchase Plus Improvements programme with its own criteria and its own completion window.
Note the two different numbers, because they get conflated constantly. The 95% figure is how much of the improved value can be financed in total. The 10% figure is how large the renovation portion can be. A quote that assumes you can add any amount of renovation to the mortgage is misreading the first number.
Completion timelines also differ by insurer, commonly around 90 days with some insurers and up to 120 with CMHC. That window is firm, and it is the constraint most likely to cause trouble if your contractor's schedule slips.
Your broker will route the application to whichever insurer fits your file. What matters is knowing the product exists so you can ask for it by name.
What Happened to the Zero Percent Option
Most articles on financing efficiency work still tell you to exhaust the Canada Greener Homes Loan first, on the reasonable logic that 0% beats any mortgage rate. That advice is now out of date.
The Greener Homes Loan closed to new applications on October 1, 2025, its funding fully committed. The Greener Homes Grant closed to new applicants earlier. Approved borrowers can still complete their projects and draw their funds, but the programme is no longer an option for anyone starting now.
What is left splits along income lines. The Canada Greener Homes Affordability Program funds no-cost retrofits for low and median income households, delivered through participating provinces rather than through Ottawa. Above those thresholds, support is provincial and utility level, and varies widely.
There is one federal mechanism still worth naming here, because it sits directly alongside a Purchase Plus Improvements mortgage rather than competing with it. Both CMHC Eco Plus and Sagen's Energy-Efficient Housing Program offer a 25% partial refund on mortgage insurance premiums for homes meeting recognised energy efficiency standards such as ENERGY STAR, R-2000, or Passive House. You apply after closing, typically within 24 months, with an EnerGuide label or certified programme report as evidence.
That refund does not fund the renovation. It does mean that if your improvements push the home over an efficiency threshold, a quarter of your insurance premium comes back. On an insured mortgage that is real money, and very few buyers claim it.
Before You Commit
A Purchase Plus Improvements mortgage converts a renovation from a cash problem into a financing decision, at the lowest rate most households have access to. That is a genuinely useful tool, and it is underused mainly because nobody mentions it.
It is still debt secured against your home, amortised over decades. Work through the numbers with a mortgage professional, and if the scope is meaningful, a financial advisor as well.
If the renovation involves energy efficiency, start by finding out what your house actually needs. Homeo's free home energy estimate identifies the upgrades with the strongest return in your specific house, typical costs, and the incentives currently open to you. Bring that to your broker and the improvement figure in your application will be grounded in something real, which is exactly what lenders want to see.
Bring your broker a real number
A free home energy estimate identifies the upgrades with the strongest return in your house, plus costs and available incentives.