Considering building a new home? Here is what you will need to understand.
Building a home is complex; your low mortgage rate shouldn’t be.
Let’s take a look at three different ways to finance your newly constructed home in Canada:
- Builder/Contractor built a home with your money: Customer has made an agreement with a registered builder to construct their home.
- Mortgage Options: Completion Mortgage or Progress Draw.
- Self-Built Home: Customer would like to act as his/her own contractor.
- Mortgage Options: Completion Mortgage or Progress Draw.
- Builder constructed home with their money: Customer requests funds when the home is 100 % complete.
- Mortgage Options: Completion Mortgage.
After you have purchased or built your new home through a residential homebuilder you will then require Canadian mortgage rate funds when the house is finished.
Progress Draw Mortgage
This mortgage is a type of funding that is advanced in intervals.
- Solicitor: A progress draw requires a solicitor.
- Progress Inspection Report: Details progress before the advancement of the best mortgage rate funds.
- Interest on Draws/Advances: Interest is charged on total amount advanced.
- Final Advance: Released upon final inspection after verifying that the job is complete.
- Mortgage Insurance: Land draws are not available under CMHC guidelines.
There are generally 3 stages to building a house:
- Roof Stage / Roof Tight— Approximately 35 % complete.
- Intermediate / Lock Up— Approximately 65 % complete.
- Final Occupancy / Completion— 100 % complete.
- Written employment and income confirmation
- Proof of down payment or equity
- Copies of quotes
- Full appraisal
- Plans / House specifications
- Fire insurance certificate
Do you need help working out the details of your construction mortgage? Contact FamilyLending.ca for expert advice.
Don’t get burned by a hot market
Know Your Budget
It’s a risk for any buyer to get in over their head with too high of a best mortgage rate investment. Remember to consider all costs related to buying a home and owning a home. You will need to make the mortgage payments, pay the utilities, do household repairs, etc.
Know Your Budget for the Future
Interest rates are at a low; inevitably, they will rise. Before you sign a deal, calculate the amount you would be paying a month for your Canadian mortgage rate if rates rose by 2 or 3 percent.
Separate from the Pack
A number of houses attract a large group of buyers and provoke a bidding war. Search for a house that is a 15-minute walk to transit, needs some renovation work, has a shared driveway, or another feature that most buyers might avoid.
Know Your Needs
Make a list of what you truly need. Also, make a separate list for wants. Remember: you can only make a house bigger if you have enough land (and money). While you can always renovate, you can’t fundamentally change a home’s layout or its location.
Choose an agent who can help you navigate bidding wars and the best low mortgage rate. Make a pact with your partner to keep your price range and must-have items in mind at all times.
Be patient and wait for the right house or the right offer to come your way!
Know what you can afford – get a mortgage pre-approval.
When it pertains to securing a mortgage, people would like to be aware of the amount of money they are able to borrow. The following are a few quick formulas to assist you to determine exactly what you are able to afford.
Loan to Value (LTV)
Lenders will only allow you to borrow a certain amount of the property value. This borrowing amount is known as the Loan to Value or LTV. LTV (%) = (the amount of mortgage loan) / (the value of the property).
You may borrow as much as 80 % of your property value (80 % LTV) without fretting about low mortgage rate default insurance fees, or as much as 95 % with default insurance fees. Whether you are obligated to pay CMHC or not, your mortgage rate loan insurance depends on your LTV.
Total Debt Service (TDS) Number
Your TDS number is the percentage of your gross annual income that is required to cover payments associated with your new home, plus costs linked with your other debts.
TDS = (Home expenses + Car Loans + Credit Card Debts + Other Loans) / Gross Income.
Your total debt service number (TDS) should not exceed 40 %. This provides you with a cushion in the event of a financial emergency.
Gross Debt Service (GDS) Number
Your GDS number is the percentage of gross annual income necessitated to cover payments connected with housing, including best mortgage rate payments, interest, property taxes, and heating.
GDS =(Annual Mortgage Payments + Property Taxes + Interest + Condo Fees + Heating) / Gross Annual Income.
Your gross debt service number (GDS) should not surpass 32 %.
Are calculations not your forte? Contact a mortgage broker today for personalized help.
Find the best mortgage rate today!
Did you know, homebuyers who hunt for a mortgage rate are most likely to secure a competitive financing option than those who don’t? Studies have shown that consumers who compare mortgage rates and ask questions during the pre-approval process are most likely to save more money.
How Can I Find a Great Mortgage Rate?
As mentioned by the Bank of Canada Discounting in Mortgage Markets study, homebuyers can increase their chances of securing a low mortgage rate:.
- By collaborating with a qualified mortgage broker.
- Asking lenders about preferential rates based upon loyalty, age, and finances.
- People who purchase a house in a nearby city are often offered better deals.
Be Cautious of Bank Postings
When it pertains to finding the best mortgage rate, do not automatically assume that the bank’s rate is the best option. As mentioned by the Discounting in Mortgage Markets study, posted bank rates tend to be the same. It is the negotiating that occurs behind the scenes that often allows mortgage brokers to offer their clients lower rates.
Comparing rates online and exploring the market gives you the power you will need to make an informed decision. Get in touch with a mortgage broker today to begin your rate comparison and enhance your chances of finding a reasonably-priced mortgage product.