Building your new home is a complex process – Finding the right mortgage shouldn’t be!
Before you decide on purchasing a home that is being built specifically for you, let a Red Deer mortgage broker with Dominion Lending Centres help you understand the special circumstances that might be involved in construction, or self-build, mortgages. Our mortgage experts will assist you in deciding on the best options to fit your specific needs.
There Are 3 Common New Construction Mortgage Categories:
1. Self-Build Home
In this first category, you are acting as your own contractor and you are hiring subcontractors directly to work on the different aspects of your home construction. If you fall into this category of self-build mortgages, your mortgage options are a progress draw mortgage or a completion mortgage. Your funds will be released in installments as long as progress is being documented on the construction of your home.
2. Self-Build: Builder/Contractor
The second category of self-build mortgages can sometimes be referred to as Turn Key. This involves an agreement between you and a contractor who agrees to build your home based on your specifications. If you fall into this category, your mortgage options are the same as the first category, but your contractor can request financing draws. The best tip for this type of financing is to stay involved in the construction process to ensure your timeline is being met and your installments can be disbursed on time.
3. Buying From a Builder
In the third category, you are purchasing a newly constructed home or condo from the builder. This is a great option if you to be involved in the stlying of your home, but not in the planning and constrcution. If you fall into this category, your option is a completion mortgage, where the funds are received once your home is completely built.
If you are in need of new construction financing, your Dominion Lending Centre specialist is available to go over the details of your financing and provide you with professional guidance as you make your home financing decisions.
Tips For A Successful Self-Build
- Keep your neighbourhood in mind. The biggest, most expensive house may be hard to sell in the future.
- Don’t spare any expenses when it comes to a contractor. Hiring the most qualified contractor you can with your given budget will ensure you have a quality home at the end of the process.
- Expect delays. Plan ahead so you are prepared for any issues that may cause delays.
- Stay involved in the process. This can help you catch any mistakes right away and keep your team on track with your timeline.
- Keep an eye on your budget. You will usually receive allowances for certain items like flooring and fixtures, so make sure you can get what you want within that allowance and that you are making good use of every penny!
Tips For Successfully Buying From A Builder
- Get a pre-approval. Before you even begin the process of searching for a builder and a home you want, it is important to get pre-approved for your mortgage. This gives you a better idea of what you can realistically afford to spend. Consult with a trusted Red Deer mortgage broker to find out your mortgage pre-approval options.
- Plan ahead. Research homes, communities, and builders before making decisions. Selecting the right builder can be just as important as choosing the right home.
- Make lists. Write down what you want in a home and what you need in a home. You may find that these lists are very different. Use these lists to evaluate the houses and communities you are interested in and then decide how important each item really is. Make sure you are also considering any maintenance that may be required after construction is completed.
Progress Draw Mortgage
A Progress Draw Mortgage is a mortgage where a portion of the purchase funds are advanced at certain intervals while the home is still under construction. These advances are usually given at 35%, 65% and 100% of completion. A Land Draw may also be required if you are also purchasing the land on which the home is being built.
In order for each draw to be released, an inspection, detailing the current completion percetange, must be performed. The final draw will not be released until the inspection confirms that the construction has been completed on your home. Once this has been confirmed and you have signed the final mortgage documents, you will be eligible to recieve the final advance from your lender.
If you are purchasing or building your home through a Residential Home Builder and do not require the funds to purchase your home until the construction has been complete, you will need a completion mortgage. With a completion mortgage, you will need to make part of your downpayment when you submit your offer to purchase the home and will pay the rest of your downpayment in installments as construction on your home progresses. Once your home has been completed, you will receive the mortgage funds to pay the remainder of the purchase price and take possesion of the home.
Contact your local Red Deer mortgage broker, Tania Grozelle, today for more information about your new construction financing options!