New Construction - Ryan W. Smith - House & Home Mortgage Co.

Building a home is a complex process; your mortgage shouldn't be.

Before deciding whether to purchase or build a brand new home, let me help you understand the special terms and considerations in construction, or progressive-draw mortgages.

NEW CONSTRUCTION FINANCING OPTIONS TYPICALLY FALL INTO 3 CATEGORIES.

1. Self-Build Home

"Self-Build" is when you act as your own contractor; hiring subcontractors to complete the work. Your mortgage options are: Progress Draw Mortgage, Completion Mortgage. Only those who have prior experience in home construction should consider this option as it comes with a significant amount of responsibility to follow through to completion. There are few lenders who will consider this type of situation.

2. Builder/Contractor Built (progress draw)

This would typically be referred to as a"Turn-Key" home. In these situations you contract with a professional contractor to build your home. Typically the builder will request funds at certain stages of completion(i.e. 20%-40%-60% complete, etc.). There are lenders who will advance the mortgage in stages (draws) as construction goes along. This is a great option if you are building a custom or semi-custom home through a reputable builder.

3. Buying from a Builder (Turn-Key)

These are mortgages on newly constructed homes, town homes, or condominiums. When the funds are only required upon completion of the home, then you will be looking for a standard mortgage product. Although there are some specific questions to ask and things to watch out for, there are many lenders who can help with these types of purchases.

I'm here to help you review the details of any new construction financing. Each situation is different and presents unique challenges and opportunities. As such, I suggest you get the professional advice you need to make an informed decision.

6 TIPS FOR A SUCCESSFUL SELF-BUILD

Consider the neighbourhood. Having the biggest and most expensive house in the area may be wonderful, but it may not be easy to sell.
Build for resale. No matter how long you intend to stay in the house you build, it will have to be sold at some point. It's generally not a good idea to build strictly for your own needs and tastes.
Get the best contractor your budget will allow. When building a house, quality is usually more important than quantity.
Be prepared for delays. Unexpected delays can happen which may prolong the entire process.
Monitor the progress. During construction a lot can be accomplished in a short amount of time. Catching a mistake early will save a lot of headaches later.
Watch your construction allowances. Generally, in the total cost of building a house you will be given allowances for such items as flooring (carpeting and vinyl), lighting, plumbing fixtures, etc. Make certain that you can actually get the materials you want within the allowance amount.

6 TIPS FOR BUYING FROM A BUILDER

Do Your Research. Look at homes and communities and talk with the builders themselves. Plan ahead to help you prepare for a successful home search.
Define what you are looking for in your new home and community. By weighing your needs and wants, you'll be in the best position to determine what's most important to you. Then use your list to evaluate each house you visit.
Get pre-approved. It's a good idea to determine your price range before you start looking for your new home. Discuss your options for a pre-approval with us first. This will help you best understand how much you can afford to spend on your new home.
Select the right builder for you. When you choose to buy a new home, you should be confident in the company that will build it. Check to see that the builder has qualifications and is able to meet your needs and expectations. Ask for references and talk to other clients about the builder's work, or check the new home warranty program.
Warranty. Builders are required to offer a third-party new home warranty and after-sales service on workmanship and materials in your new home. Keep in mind that warranties vary from one province to the next, so check to make sure you understand yours.
Maintenance after completion. Many builders will provide you with a homeowner's manual describing the various elements of your home which set out the requirements for regular maintenance and service. This not only helps you to keep your home in great condition, it also helps to ensure that you do not void the warranty on your home.

If you have any questions or need guidance on your self-build or buying from a builder, Contact US today!