What Is a Construction Mortgage?
Congratulations, you’ve decided to build your own home! Many Canadians are choosing to build custom homes with special features to suit their lifestyles and personal tastes. While building your own home can be a creative and exciting experience, it can also present some complicated financial challenges. A construction loan broker like the GLM Mortgage Group can help explain what to expect.
Before deciding on a brand new home, it is wise to learn about the special terms and considerations in construction loans, also known as self-build mortgages. The GLM Mortgage Group has certified mortgage brokers that can help you decide which option best suits your particular situation. Construction mortgages are generally of two types:
- With a progress draw construction loan, money is disbursed to you as construction progresses. There are normally three draws at different stages of construction: 35-40%, 65-70% and 100% completion. Completion is verified at each stage by a progress report from an appraiser. For example:
- The 1st draw will be after the completion of the foundation approximately 15 to 20% completion
- The 2nd draw would be called after the roof, outside walls, roughed-in plumbing and electrical wiring is 45 to 55% complete.
- The 3rd draw would be called after the drywall, bathroom, kitchen, all cabinets and fixtures are done, approximately 70 to 80% complete.
- The 4th and final draw would be called after all the interior and exterior is 100% complete.
- The construction loan company wants to hold 10% of the costs as a builder lien hold back in the event that tradespeople are not paid.
- Completion mortgages apply to newly constructed homes purchased from a builder. Money is required only when the home is 100% complete. A down payment is still needed, but can often be paid in a series of installments.
What to Look For in a New Home
With your financing secured you can start to look for new home developments or plan your rebuild. We invite you to refer to our network of preferred partners for links to builders and real estate agents.
As you begin your new home project, keep these tips in mind.
- Do a thorough check on the builder or contractor you have chosen. You need to know that they offer high-quality work and warranties or guarantees on workmanship. For new homes, look into the type of support you can expect after your sale is complete.
- When buying a new house, take a close look at the model home. It is a showcase of the builder’s skill and attention to detail so make sure you examine all facets of the construction.
- Always review plans carefully. Be clear on what is and is not included and what types of changes you can make as the construction progresses.
- Always get a written warranty or guarantee and read it. You need to know what is covered and ask about things that are not.
Building a new house or renovating an existing one is a big accomplishment in life. It helps build personal equity or adds value to your home. If you are in the Vancouver/Fraser Valley area and building a new home or renovating your property, we can provide flexible construction financing alternatives.
Most banks do not understand the business of construction financing, as they want to avoid risky and complicated loans. We have the experience to provide timely construction financing on your schedule. Renovating or building a home is stressful enough, the last thing you need is a problem with financing.
Construction Mortgage Facts:
A loan borrowed from a construction loan company to finance the building of a home typically only has interest paid during the construction period. Once the construction is over, the loan amount becomes due and it becomes a normal mortgage. The money is advanced incrementally during construction, as construction progresses.
Financing to build a new home typically comes in the form of a construction-to-permanent loan. This financing option has two parts: a loan to cover the costs of construction, and a mortgage on the finished home. The advantage of such plans is that you have to apply only once and you will have only one loan closing.
A construction loan, unlike a mortgage, isn’t meant to be around for a long time. If you’re taking out a $200,000 construction loan for six months and you pay an extra 0.5 percent on the loan, it costs you an additional $250 (Assumes an average $100,000 loan balance over a six-month construction period).
It’s important to note that if you are willing to pay a higher rate on the construction loans, if you’re doing construction-to-permanent financing, you can get better mortgage terms or a longer and better rate lock from that lender.
The GLM Mortgage Group wants to be your construction loan broker and can help you financially navigate your way through building a house, from your dream to reality.
What is the GLM Mortgage Group?
GLM Mortgage Group, powered by Dominion Lending Centres, is your Vancouver and Lower Mainland Mortgage Brokerage service. We are always ready to move forward with you to obtain the mortgage you need with the sharpest mortgage rate available. Whether it’s a fixed rate or variable rate mortgage you are after, we are dedicated to finding the best mortgage rates in Vancouver, including Home Loans, Consolidation Loans, Lines of Credit and more. No matter what you need, our team of Mortgage Specialists will follow through to find the best mortgage product that fits your individual circumstances. Our free online mortgage calculator keeps you informed on how much your mortgage payment will be as well as show how different mortgage rates will affect the mortgage you require.As your Vancouver mortgage broker, GLM Mortgage is committed to clear communication with our clients. We make sure you are informed on all the mortgage options available to you. We call you back within 90 minutes to make sure that you have the fastest service available. We are not only available in Vancouver and the Lower Mainland, we are also available across Canada.GLM Mortgage Group is your Vancouver mortgage specialist. With over 22 years of experience in the investment industry we know how to wade through the challenging process of getting a mortgage. We provide smarter options to putting your mortgage in place. We know how important it is to have an experienced professional Mortgage Specialist available to walk through your mortgage experience and stay with you through to the very end.We get you a fast “YES” at the sharpest rate… guaranteed! Call us now so that you can get that mortgage you’ve been waiting for. We already have been working for you, making sure that you will have every option of a mortgage available to you. GLM Mortgage Group is on call for you!