I am looking at buying a new construction home. What type of products do you offer?
Various Mortgage products may be available with rate caps from 4 months up to 12 months.
What is a rate cap?
A rate cap locks in the maximum interest rate a client will receive for their mortgage. The rate cap is based on the rates at time of application for the selected product, less any discretionary pricing if given.
How can I stay in my current house while I am building my new one?
Some self-build/progress mortgages can fund construction of your new home while you remain in your current house. This will have to be approved by the lender. This approach, if approved by the lender, can be a more economical strategy of structuring your finances rather than selling your current home and moving to rental accommodations. Provided you qualify, the lender will require confirmation of the sale of your current home (a written unconditional sale agreement) upon reaching a predetermined point of completion of the new home.
For peace of mind and in order to ensure you have more cash to work with, many applicants opt to sell prior to starting construction on the new home and reside in short-term rental accommodations or with other family members.
Can the interest rate cap be extended?
No, the rate cap is set for the period chosen. If the rate cap expires, current rates will take effect.
If my progress draw mortgage has been approved as an insured mortgage, but I can now afford an uninsured (conventional) mortgage, what happens to the insurance premium?
As the mortgage was approved as an insured mortgage you will still have to pay the original mortgage premium to the insurer, as this is part of the original terms and conditions of the mortgage, regardless of whether this mortgage is cancelled or amended to conventional.
Is the land draw deducted from the 1st draw?
Yes, when a land draw is approved on a conventional mortgage the 1st draw is split in to two portions (remember lands draws can be approved on conventional mortgages only).
Can I have a land draw if I already own the land?
Land draws are subject to approval for conventional mortgages when the land is being purchased, has been purchased and is free and clear, or if there is an outstanding loan secured by the land.
If property is 95-99% complete, will the lender treat as 100% complete? What is the minimum percentage lenders will fund final advance on?
Lenders will only fund if the house is 100% complete (less 3% allowance for seasonal holdbacks). This means that the house can be complete to 97% and the only thing that is not complete is something like siding or pouring the driveway. If this is the case, the lender will only fund 97% to the solicitor holding back the 3% until a final inspection advises the house is 100% complete.
After the first draw can I change the terms and conditions of the mortgage?
There are times when you can change your final mortgage terms after the first draw. You usually do not sign the final mortgage documents until the house is complete and therefore can make changes until that time.
Can I port my existing mortgage to a New Construction Mortgage to eliminate or reduce prepayment charges?
For completion mortgages you must return to your existing lender with a new mortgage to maintain the portability features. The new mortgage must fully fund within 90 days of the old mortgage being paid out. Please note that conditions vary by lender, other qualifications may apply.
For progress draw mortgages, you have up to 90 days in order to maintain portability features. The first advance of the progress draw must be within 90 days, and the final advance of the completion mortgage must be within 12 months. The prepayment charge is paid upfront, and then refunded once the final completion mortgage is advanced.
How long do I have to build?
Generally, there is no set amount of time imposed. However, keep in mind that funds will not be advanced if there is no progress in construction. Keeping to the construction timeline is far more economical to your bottom line.
On a self-build mortgage do I pay interest on the whole amount I want to borrow or just what I have borrowed so far?
You only pay interest on the amount you have actually borrowed. As your project progresses and you borrow more, your monthly interest payments will increase.
How does the Construction Lien Act affect my construction project and how is it handled during construction?
Any person or company that supplies your project with materials or labour has the right to place a lien against the title of your home as a method of recovery in the event of non-payment. The Construction Lien Act requires that an amount be held in trust from which a lien may be paid. The lender will instruct the solicitor to hold back an amount (usually 10% of each draw payment) until 45 days after substantial completion of the home. You should consult with your lawyer regarding the impact of the Construction Lien Act on your project.
HOME BUYING FAQ
Can we make changes to the mortgage application, such as length of term, repayment frequency, etc., once the application has been submitted?
Yes. Your ideal mortgage formula has probably already been created, but if you want to consider a change let's review the possible benefits and implications.
Is GST paid on a resale home?
There is no GST unless the house has been renovated substantially, and then the tax is applied as if it were a new house.*
What is an IAD or Interest Adjustment Date?
If your transaction is due to close in the middle of the month, but your regular mortgage payments are set for the start of the month, your first mortgage payment could be delayed for several weeks. To cover this, a date is set as the IAD and an amount is collected on closing to cover this Interest Adjustment Date period.
How much of a downpayment will I need?
The downpayment usually represents between 5-20% of the total price of the property.
What is the difference between High Ratio Mortgage Insurance and Mortgage Life Insurance?
High Ratio Mortgage Insurance protects the lender against payment default by the home buyer. It is required by most lenders if the home buyer has less than 20% downpayment. An insurance premium will apply. Mortgage Life Insurance protects your dependents and loved ones in the event of your death.
When the mortgage lender pays the Property Taxes, how are payments calculated?
The estimated amount of your Property Taxes can be added to the mortgage payment and paid on your behalf at the appropriate times. Depending on the balance in your tax account, it may be necessary to increase or decrease the amount of monthly payments to reflect the timing of Property Tax payments.*
* Tax information consists of general comments only, for full details see the applicable legislation or review with your advisor.