A construction mortgage is a loan that covers the expenses of constructing your home. This differs from other types of loans in a number of ways. Here are a few options especially designed for construction mortgages.

1) Completion Mortgage

You can get two types of mortgages when you are constructing a new home. The first is completion mortgage where the loan isn’t transferred until construction is fully completed. You may still be required to pay a down payment.

A completion mortgage can give you peace of mind that the mortgage won’t be finalized until you have something in. You probably won’t have to wait that long if you want a completion mortgage. Most lenders who do these types of loans want the construction to be finished in 4 months.

2) Draw/Progress-draw mortgage

The draw or a progress-draw mortgage permits the builder to draw funds during the building process. Using a progress-draw mortgage, the loan is disbursed in installments. The first installment will be given when the build starts. The second installment will be given once the construction is finished at around 35-40%. The third installment will be given at around 65-70% completion of the build. The final installment will be given when the build is close to or at 100%. This option is also available if you’re building your own home.

Thinking of renovating your home but you are lacking the funds to support your major makeover. Are you looking for a home renovation mortgage? Here are some amazing home renovation to help you turn your dream home to reality.

Home Equity Loan

This is the most common loan that you can get for your home renovation. You won’t be able to borrow the actual value of your home with this kind of loan. However, without mortgage insurance, you can usually borrow up to 80% of its value if you own it outright. The possible problem with this is that the cost of your renovation plan may be bigger than the equity you have available.

Construction Loan

This is also comparable to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be able to get the full loan value upfront. The loan amount will be disbursed via installments according to the renovation plan.

Line of credit

This is ideal for long-term renovation plans. You can set up a revolving credit line that you can access whenever you want up to your approved limit. You are only charged interest on the funds you use. You can re-borrow the unused funds without reapplying as you pay off your balance. However, in terms of serviceability, the application must be taken not to get in over your head. Ensure that you can make repayments on the line of credit that will reduce the principal amount.

Homeowner mortgage

This might be the best option for you if you’re planning to undergo a significant makeover for your home. It is possible to borrow up to 90% of the value of your home and take advantage of mortgage rates, which are often lower than credit card and personal loan rates.

Personal loans

Personal loans are usually capped at around $30,000. This might be suitable if you’re only doing minor renovations. However, interest rates on personal loans are higher compared to other loans since they are unsecured loans.

Credit cards

This option is only for miniature renovation projects. The interest rates are usually much higher compared to any other mortgages. However, for a very small project, that higher interest might actually be less than loan establishment fees.

Contact us if you’re looking for a renovation mortgage and we’ll help you with the available options as per your credit profile. Speaking to a certified mortgage broker who specializes in renovation mortgages will help clear up any concerns you may have. Let us help you explore all of the options available based on your credit score.

It is more complicated to get a construction loan than other mortgage processes.  Here are the most common questions and answers on construction finances:

1) How much is the interest rate and service charges?

Interest rates and services charges vary from one lender to another. They will likely require a minimum 1-2% service charge if the lender is institutional. A private lender will require a minimum of 2% service charge. A private lender will charge 8-15% interest only and they will go behind a bank but not a private lender. A second mortgage rate will start at 10%.

2) What about mortgage payments?

You don’t make monthly payments in construction loans. The interest is calculated and taken away from the construction draws.

3) How much I can borrow?

You can usually borrow up to 100% depending on your current net worth. We can be very accommodating if your net worth is weak but you have a good location.

4) How do we get started?

A mortgage agent will be able to tell you if you’re going to qualify or not.  The agent can start the process with an application by preparing an Executive Summary for the lender if you’re qualified. Your mortgage application is under process from there.

5) Do I have to give a deposit to get the loan?

Although there is no need to provide a deposit for the loan, the lender may ask for enough deposit to cover legal fees if you change your mind and the lawyer has already worked on the deal. The deposit amount can usually, go up to about $1,000 to cover legal fees. This is applied to the legal fees of the lawyers.

Contact us to know more about construction mortgages in Toronto. You can also drop your questions in the comment section below and we’re happy to help you with a reply.

Do you need a construction loan for your new home? Getting a construction mortgage is not as easy as a personal loan. You need a lot of patience to navigate through the process of finding the right builder and obtaining a construction loan. Here is a step-by-step guide for a construction mortgage.

1)  Finding the right agent.

When financing new construction, this step may not be an important one. However, it can help you to avoid contract headaches in the future if you work with an experienced agent who isn’t affiliated with the builders. You should find someone with experience in negotiating new construction deals.

To know more about construction mortgages in Toronto, contact us by following the link below:

2) Get your credit in order.

The important part of any home financing or other mortgages is your credit score.  This is all about pulling out your previous credit history from any of the major credit bureaus (Equifax, Experian, and Trans Union). Please remember that your credit score is the key player that will lead to your mortgage approval from the lender.

3) Collecting your documents.

Make sure you have proper documentation of your expenses and financial history, including annual income, total debt, investments, other assets, and 401k funds in addition to your credit score. Your agent will provide a detailed list of all the documents.

5) Research builders.

You know what you can afford with a pre-approved mortgage.  Now it’s time to look for a builder. Remember that the builder with a better track record is also a key to the final approval of your mortgage application. Go online and check the builder profile and the reviews of their previous customers before you finalize. We also suggest that you check their previous work in person.

6) Purchasing the land.

The land price will affect your overall pre-approved budget if you’re planning to build the home on a newly secured land. In this case, you have to think carefully about how the cost of securing land, an architect, and a builder will add up.

7) Choosing a builder and get a signed plan.

You now need to work with the builder and a blueprint you love in a neighborhood you want. You also need to make sure that the plan falls within your pre-approved lending limits.

The information you’ll need to acquire a mortgage will vary by every lender. However, you have to include the builder’s work history, insurance and references, home blueprints, specifications, a line-item budget, a draw payment schedule and a signed construction contract with beginning and end dates.

8) Applying for the loan.

Now you can bring your proposal to the lender you have chosen to receive the loan from. It’s also better to consider your builder’s preferred lender. Working with them may make the process smoother and faster. Choose the lender who gives you the best rates for your current financial situation.

9) Draw and pay interest.

Construction loans are paid out in monthly terms to your builder based on the amount of work they have done. Pay interest on your draw amounts once you have secured the necessary credits, and wait for your home to be constructed!

Are you constructing your own home, garage, workshop, or any other structure? It is great because you can get exactly what you want. You get to decide about design, quality, budget, and more. However, one of the many decisions you’ll need to make is how to pay back the construction loan after the building is complete. Will you adopt a single-closing loan or two separate loans?

Construction loans are only for purchasing land and building structures. They usually last for no more than 12 months. You need a way to transition to a longer-term loan for lower payments that would come with a longer duration. You’ll need to pay off the construction loan once construction is finished. Many people do this by replacing it with a new loan that looks more like a standard 15 or 30-year mortgage.

Single-close construction loans

Single-close construction loans grant you the construction loan and the permanent loan at once. Your loan becomes a traditional mortgage when construction is completed. These loans are also known as construction-to-permanent loans.

Two-close construction loans

You need to get approved for two loans in a two-close construction loan. The loan will fund your project, and you’ll need to apply and get approved for a permanent loan separately after construction is completed.

Naturally, you’ll want to know which is better, and we’re here to help you with that. Call us to know more about construction mortgages in Canada.

Advantages of a One-Time Closing Loan

One application: It can feel like you have a never-ending research project when applying for a loan. You only have to go through the process once with a single-close loan.

One closing: Multiple closings mean greater costs. However, the cost difference might not be exciting, and you don’t necessarily come ahead with a single closing.

No payments: With few lenders, interest costs throughout the construction phase can be added to your permanent loan. This makes it easier for you to pay while you wait for your new home to be built. You’ll owe more and pay more interest. Delaying payments might be a sign that you’re almost at breaking point.

Security: You’re taking less risk when you have permanent financing in place before you ever borrow for construction. You’d have a hard time convincing a lender to approve your loan while you’re in-between jobs with a two-time closing. This might cause you to lose the home before you even get to live in it.

Locking rates: It will help you plan for your future when you finalize your permanent loan. You can calculate and budget for monthly payments well in advance because you’ll know what your interest rate will be. If you think rates will rise significantly during the construction phase, you can also lock in a rate. But if rates fall, some lenders allow you to adjust.

Advantages of Multiple Loans

Lower rates: Single-close loans probably go with slightly higher rates. You lower your risk and enjoy the convenience of one closing when you use a single loan, but those benefits come with a cost.

Flexibility: You’ll have to choose a prepackaged program when you use one loan. This means lenders may offer you choices of single-closing 15-year, 30-year. You get to go out into the marketplace and apply anywhere you want for any kind of loan when you keep your permanent loan separate.

If you’re planning to go for a construction mortgage in Canada or if you want to get advice from one of the best mortgage agents in Canada, you can contact us and we can help you.

What Draw/Progress-draw Mortgage

The Draw/Progress-draw mortgage is one of the construction loans which allows the builder to draw money during the building process. The loan is distributed in installments or according to the stages of the build.

The foundation part which is the first part of the loan will be given at the beginning of the build. Once the build is reached around 35-40 percent, the second part will be given. Once the construction is reached about 65-70 percent, the third part will be given.  The final part will be released once the build is at 100 percent.

Why Draw/Progress-draw mortgage

The progress-draw mortgage is favorable from a cash flow outlook. The builder doesn’t need to come up with the money for the construction upfront in this case.  However, inspections are required throughout the building process from the lender. This is to make sure that the construction is right on schedule and done properly.  The builder doesn’t get the next payment in case the structure doesn’t pass inspection.

Pros & Cons of Progress-draw mortgage

With the progress-draw mortgage, you’ll be charged interest from the date of your first payment.

You can’t change the mortgage once your lender advances the initial payment.

The Progress-draw mortgage must be secured by the land in addition to its improvement worth. This is combined to make up the total value of the project.

The builder is able to receive the foundation draw of financing at once if the plot of land has little or no mortgage.

You may need to raise up that cash yourself until the first disbursement of the loan if that’s not the case.

You need to come up with a significant amount of money up front if you’re planning to build a home by keeping your costs down. When estimating costs for material and labor and planning for unexpected contingencies, that amount of money has a tendency to increase.

We can help you if you’re looking for construction mortgages in Toronto. For more information on the construction loans, contact us now and we’ll be happy to assist you.

How and where can you find financing for home renovations? Well, there are a lot of options like home renovation centers such as Home Depot or IKEA. Even though these companies offer great products, they can’t match a financial institution’s lending rates. Borrowing from unconventional sources like this means higher annual interest rates and monthly payments.

Here are some options for getting renovation finance for your home.

A Home Equity Line of Credit (HELOC).

You can leverage your home equity and get a home equity line of credit. This is basically just a loan that you can pull money from and payback regularly until your term ends. Since the HELOC is a credit against your home, you can get a higher amount and it can cover all of your renovation plans. This is one of the best options for a renovation loan. This sort of credit usually comes with a low-interest rate which starts from 3-4 percent.

A Second Mortgage.

You can consider getting a second mortgage to cover your home renovation financing if the HELOC is not a good option for you. In case of default, a second mortgage is a mortgage second in priority. This means your first mortgage lender must be compensated first in case of a loan default. The second mortgages come with a higher interest rate than the first. However, you still benefit from rates much lower than what a retail store can give, so this option is also highly praised.

You can refinance your existing mortgage.

It might be a good idea to refinance and benefit from the current low mortgage rates if you are already several years into your existing mortgage. You’ll be able to use some of your home equity to get the cash you need to renovate. You’ll also save a lot of money on interest.

Do you need some help to getting started?

Talk to our top-rated mortgage agent in Toronto and we’ll help you find the right type of loan product for your home renovation project.

It is a financial strain when you buy a home with a huge down payment. This might lead to problems if you forget the cash you will need for closing.

Closing Costs When Purchasing A Home

Everyone looking to buy a home wonders what the average closing costs will be. It is natural to wonder, considering how much the closing costs can be if you are not careful. The truth is, the costs aren’t that much, given the amount of the home. But they can cause problems because they are usually paid right away and in cash. Typically, they add to the down payment amount and can cause cash flow problems for buyers.

Closing are not easy

As you might know, closings are not easy to quote. Closings in one state differ from another as they involve different things and costs. Closing costs related to things like points and property taxes depend on the particular deal and geographic location. For example, some states do not collect property taxes. This means they don’t collect a deposit at closing. Generally, you should take these figures with reservations, just use it as a guideline.

Most lenders roll the majority of closing costs into the payment plan for the loan to protect their investment in you. For example, the lender will ask you to pay a deposit to one of their accounts for future property taxes and such. If you are lucky, some creative lenders will roll these costs to the loan given to you.

No Point,No Fee Home Loan

The average total closing costs for a $180,000 mortgage amounted to between $2,000 and $10,000. The numbers have risen quite a bit over the past couple of years as of 2003. This figure is actually an ambiguous calculation of costs ranging from appraisals to fees and taxes. Do not assume that these figures will apply to your specific situation when you go into a real estate transaction. To know exactly what is coming and the amount of cash you need on hand, get a clear written statement of all costs.

There is one way to attack closing costs if you are buying a home. You can go for a no point, no fee home loan. Most of the expenses charged to a buyer are going to disappear assuming you can find a lender. You have to get the loan, of course!

It is a good sign when you are wondering about the closing costs when purchasing a home. This means that you are properly thinking the process through. That being said, you shouldn’t rely on anything you read on the web, including this page. Get the actual terms from your lender and an escrow company. Hiring a certified mortgage broker is an excellent option if you have less than stellar credit. They know how to beat down the costs in your favor and they can also give you a solid estimate based on their experience and the lender being used.

Congratulations if you currently find yourself in the enviable position of looking to buy a second property. The equity that you stand to gain from this purchase can be considerable. Remember to plan properly to maximize your gain. Deciding what the second home will be utilized for is the first step in this process. Is it a vacation home? Or maybe a long or short-term rental? Either way, the more detailed you are about your forward planning, the smoother the process will be.

As a source of revenue

There are certain steps that you should take to ensure the home will bring in as much money as possible if you are looking at this purchase as a source of revenue. This will allow you to pay off the mortgage quickly. For this kind of investment, the cleaner the better. Nice homes are in high demand, and they bring in a good monthly rate. Enough for the mortgage payment to be made easily with cash to spare. Also, ask yourself if you are ready to be a landlord. This will involve the task of finding and maintaining good tenants, and doing what’s right for you and your property, not what’s right for the renters. Land lording might not be for you if you have the tendency to be “too nice”.

Be sure to cover all the bases no matter what your property is intended for. You should be as diligent as you were when buying your first home. You will be able to apply the lessons you learned during that process on the new home, and avoid the mistakes or areas of stress that were present in the first purchase. Most people buy a second house and then find themselves buying another. It is kind of hard to stop once you start to climb the equity ladder!