AIG's New Upgrade Advantage

When you buy a brand new house or condo, the builder will often sell you upgrades--pot lights, kitchen counters, nicer taps, etc.  Sometimes, however, it's tricky to roll them into a mortgage.

If the upgrades are included in your purchase agreement it's pretty simple.  The lender/insurer is usually okay with lending on the property and upgrades (assuming the upgrades add reasonable value to the home).

If your builder makes you pick your upgrades and pay for them after you sign the purchase agreement--and many do--then it's a little different.  Up until last Thursday, Canada's three insurers didn't have a formal program for insuring such mortgages.  (What is "mortgage insurance?")

Insurers did have "purchase plus improvements" programs, but these were designed more for improvements that are done after closing. 

Alternatively, borrowers would typically need to get an amendment to the purchase agreement to add in the upgrades after the fact.  Not all builders will do this, however.

As of this week, things have changed for the better.  AIG's new Upgrade Advantage program now explicitly insures upgrades not included in the original purchase price.  What a great idea!

Here are some things to keep in mind about the program:

• Upgrade Advantage is only intended for new construction purchases (houses or condominiums)
• AIG allows up to $75,000 in upgrades, subject to a maximum of 15% of the purchase price.  (10% was the previous rule of thumb for allowable improvements.)
• AIG permits a loan-to-value up to 95%
• Minimum credit score is 650 (with 35% GDS ratio; 42% TDS ratio) or 680 (with no GDS; 44% TDS ratio)
• Allowable upgrades include bathroom, kitchen, lighting, fireplace, HVAC, sound proofing/insulation, shingles, windows/doors, decks, and energy efficiency upgrades.
• Kitchen appliances are excluded
• The program is not available when progress construction draws are used.

AIG United Guaranty Canada is Canada's third largest mortgage default insurer.  It insures mortgages for over 30 lenders across the country.

Comments

[Toronto realtor]

This sounds great. AIG proves that they, if only another way for them to make money, know what is needed and welcome by their potential clients. Many smaller lenders stay in the "charts and numbers" fields, but AIG goes further. I`m not here to make an add for them, but again they just astonished me. As a Toronto real estate agent I come across many clients, especially first buyers that buy a brand new home and suddenly find them selves almost bankrupt because of their new upgrades they didn`t even want.
Thumbs up.

[Mike]

Hey 'Toronto Realtor' way to post a reply just to do keyword optimization for your site....Just a tip though, all blog comments sections are now equipped with 'no-follow' tags that are automatically added on your link code so google doesn't weight them at all....I now see why they do it. Thumbs down to you my friend.

On a side note, good site CMT.