Builder FAQ

Builder FAQ

I am considering purchasing a new construction home. What type of products do you offer for this type of purchase?

There are multiple mortgage products that may be available to you, with rate caps from 4 to 12 months.

What is a rate cap?

A rate cap secures the highest interest rate a client will receive for their mortgage. This cap is based on the current rates at the time of your application for a specific product, minus any discretionary pricing, if given. The rate cap is set for only the chosen period and upon its expiration, current market rates will go into effect.

How can I remain in my current home until my new home has been completed?

There are certain self-build/progress mortgages that can finance construction of your new house while you continue to reside in your current home. Just as with any mortgage product, this mortgage will have to be approved by your lender. Instead of selling your current home and residing in temporary accommodations, this method can be a more efficient strategy of arranging your finances. If you qualify for a self-build or progress mortgage, the lender will need confirmation of the sale of your current home (a written unconditional sale agreement) when a predetermined point of completion has been reached on your new home.

What happens to the insurance premium if my progress draw mortgage has been approved as an insured mortgage, but I can now afford a conventional mortgage?

If the mortgage was originally approved as an insured mortgage, you will still be required to pay the original premium to the insurer because this is part of the original terms and conditions of the contract, regardless of whether the original mortgage is revised to conventional.

Will the land draw be deducted from the 1st draw?

Yes. When a land draw is approved, the first draw is divided into two portions.

Can I still have a land draw if I am already the owner of the land?

Land draws are subject to approval for conventional mortgages when the land is in the process of being purchased, has already been purchased, or if a loan secured by the land remains outstanding.

If the property is between 95 and 99% complete, will the lender treat it as though it is 100% complete?

Lenders will only provide funding if the home is 100% complete. The only exception for this is a 3% allowance given for seasonal delays. In such cases, the house can be 97% complete and the lender will fund 97% of the loan, holding back the 3% difference until the final inspection indicates that the home has been 100% completed. At this time, the borrower will receive the additional 3% of the financing.

After the first draw can I change the terms and conditions of the mortgage?

Because you do not usually sign the final loan documents until your home construction has been completed, there are a few times during the process that you may change your terms after the first draw.

How long do I have to build?

There is usually not a time period placed on the building of your home. It is important to keep in mind, though, that the financing for your loan will not be advanced if construction has not started to progress on your home.

How much interest do I pay on a self-build mortgage?

On a self-build mortgage, you will only be required to pay interest on the amount you have borrowed. As the construction on your home progresses and you continue to borrow a larger portion of the loan, your interest payments will increase accordingly.

How could the Construction Lien Act affect the construction of my home?

According to the Construction Lien Act, any company or individual who provides you with materials or services to aid in the construction of your home possesses the right to place a lien on the title of your house. This can be used a way for them to recover their costs should non-payment occur. The Construction Lien Act necessitates that a specified amount is held in a trust from which the lien may be paid to the company or individual. It is advised that you discuss the potential implications of the Construction Lien Act on your home construction with your lawayer.

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