Over the years, I’ve been afforded the privilege of helping individuals find the right construction mortgage for their needs. As a result, I’m mindful of the key elements that differ from those of other types of mortgages. Today, let’s walk through some of the most important things you should know. With my brokering experience in this area and your construction plans, we can make an informed and effective decision together!
Materials. Outsourced specialist work such as electrical and plumbing. Inspections and the inevitable spend to make tweaks or address build hiccups along the way. These are all important details you should factor into the total cost – after taxes – for your construction project. Anything left off the table is left up to you to pay for otherwise, so you want the mortgage amount to either be greater than or extremely close to said total, saving you money and a whole lot of headaches that not even the strongest Tylenol can fix.
Rather than provide you with a massive lump sum, approved construction mortgage amounts are doled out piecemeal and in stages. These are known as “draws,” intended to provide sufficient funding for each phase of construction to help ensure the project is financially stabilized through to completion. If you already own the land on which the work is to be done, then expect the first draw to be headed your way by using existing equity. Alternatively, this initial payment can be utilized to buy the lot you intend to build or when excavation and foundation work is complete. It will vary depending on the terms set out by your lender. Generally speaking, there are typically five draws or so, each paid out once hitting a specific milestone such as completion of weatherproofing and roofing.
If you’re building a home, a certified inspector needs to ensure it’ll be a happy one. Inspections need to take place before each draw is paid out to you, validating whether the property adheres to provincial or federal construction regulations. The New Home Warranty policy is one such example for residential builds. You’ll be responsible for covering inspection fees, which may or may not be deducted from each subsequent draw on your construction mortgage.
It’s essential that you get all your ducks lined in a row in terms of construction expenses before your mortgage is approved and initiated. If you’re thinking of tacking on an extension or a back deck – anything at all related to the build – it can’t be added after the fact. Therefore, it’s easier and potentially more cost-effective to plan for all upgrades and otherwise while figuring out the total cost. You don’t want to be stuck paying out-of-pocket for any extra goodies later on!
Some mortgage lenders are more comfortable with advancing funds. Others aren’t. At the same time, one lender may have what looks like the best rate around, but what if you haven’t dug deep enough into the market and miss out on an even better one? This is where teaming up with an experienced construction mortgage broker can be a huge benefit. For instance, my goal is threefold; I’m here to ensure you get what you need at the best rates and don’t run out of construction funding, I closely maintain long standing relationships with trusted lenders to secure those optimal rates, and I’m happy to examine the market and available offers closely to ensure you make an ideal choice. Think of me as your own personal shopper of sorts, not to mention an industry insider with the right connections and experience!
On that note, are you ready to get started with finding the right construction mortgage for your needs? I’ve got you covered. Simply get in touch today, and let’s chat about your plans!