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. The GLM Mortgage Group team can help with every step of the process.
Before deciding to build a new home, it’s wise to learn about the special terms and considerations associated with construction loans, also known as self-build mortgages. GLM Mortgage Group has certified mortgage brokers who can help you decide which option best suits your particular situation. Construction mortgages generally fall into two categories:
Progress-Draw Construction Loan
With a progress draw construction loan, money is disbursed to you as construction progresses. There are normally four 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 first draw occurs after the completion of the foundation, approximately 15 to 20% completion;
- The second draw occurs after the roof, exterior walls, roughed-in plumbing and electrical wiring is 45 to 55% complete;
- The third draw occurs after the drywall, bathroom, kitchen and all cabinets and fixtures are done, approximately 70 to 80% complete;
- The fourth and final draw occurs after the interior and exterior is 100% complete.
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.
Here are some helpful tips to keep in mind as you begin:
- Conduct a thorough background check on the builder or contractor you have chosen. You need to ensure 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’s a showcase of the builder’s skill and attention to detail, so make sure you examine all facets of construction.
- Always carefully review plans. Be clear on what is and isn’t included, and what types of changes you can make as construction progresses.
- Always obtain a written warranty or guarantee. You need to know what’s covered and enquire about the items that are not.
Building a new house or renovating an existing one is a significant undertaking that helps build personal equity and adds value to your home. If you’re building a new home or renovating your property, we can provide flexible construction financing options.
Most banks don’t fully understand the business of construction financing, as they want to avoid risky and complicated loans. Our team has the experience to provide timely construction financing based 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 from a construction lender typically only requires interest to be paid during the construction period. Once the construction is over, the loan amount is due and it becomes a regular mortgage. The money’s advanced incrementally during construction, as it 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’ll have only one loan to close.
A construction loan, unlike a regular mortgage, isn’t meant to exist for a long period of time. If you take out a $200,000 construction loan for six months and you pay an extra 0.5% on the loan, it will cost an additional $250 (assumes an average $100,000 loan balance over a six-month construction period).
It’s important to note that, if you’re willing to pay a higher rate on a construction loan, if you’re doing construction-to-permanent financing, you can obtain more favourable mortgage terms or a longer and better rate from the lender.
GLM Mortgage Group wants to be your construction mortgage 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!