LT Talks RE: Thinking of Building a Home in Ontario? Construction loans explained!
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- Опубліковано 9 лип 2024
- I have the privilege of talking to Karen Matthey from Mortgage Professionals in Kingston Ontario (link to her website and email below) who is an EXPERT in Construction Loans and she handles A LOT of them in our local market. The information in the video is for Ontario Canada and the process may be different in your location.
Construction or build loans are a bit of a different animal than your standard, buy a house, get a mortgage, move in and start paying it down. There are many more steps and you need to make sure you are well informed at the outset.
Information is key and understanding the process and how it is all going to work make take some time and repetition and someone like Karen who is experienced and excellent at explaining the process (and holding your hand through it all).
As some of you may know I am in the middle of this process right now and hope soon that we will have the shovel in the ground and in not too long be ready to take our first draw on our construction loan.
If you are thinking about buying a lot and building (because, many of you are frustrated with this seller's market and buying a lot and building can seem like an attractive option), get in touch with Karen to talk about the process and then connect with me to find that perfect piece of property to build on...like I did.
Karen Matthey
mortgageprokingston.com/find-...
karen@mtgprof.com
Lisa Taylor
lisa@lisataylorrealestate.com
lisataylorrealestate.com
🤔Thinking about Real Estate in Kingston ON? Let Me help!
📱 Call or Text: 613-888-9761
📨 Email: lisa@lisataylorrealestate.com
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This was a great crash course in what I should be asking about and planning for. Cheers and thanks.
Thanks for letting me know that you found this useful!
Thank you very much, it’s really direct information for someone who is looking construction. As I got it that has a lot of process
There is a bit of a process but it help immensely if you have a mortgage broker who is very knowledgable and experienced and can walk you through the process (and options) over and over if necessary. Things have changed for us a few times throughout this process and as a result we have had to shift our lending plan and adapt. We have learned a lot!
Thank you so much for this video Lisa! It answered so many of my questions!
I am so glad it answered questions for you. If you have any others don't hesitate to reach out. Or if you have suggestions for other videos you would like to see I am always up for suggestions.
Big thanks for your info
My pleasure. Hopefully you found it useful.
Hello,
I watched your video and throughly enjoyed it. My only critique is that maybe in the title or description make it clear that this is the process in Canada. In the US there are some significant differences including the financing of the land.
Good point. I did mean to do that and I will put that in the title and description right away.
Great Video ,
Surely i m gonna have to watch few times , it lots to take from this information,
Appreciate for being such help full #Bless
Somehow I missed your comment. Thank you so much for watching and I am very glad that it was helpful. Please don't hesitate to reach out if you have any further questions. 613-888-9761
Thank you
You are welcome!! Hope you got something out of this.
Do manufactured home loan with pwned land construction for land development please
Thanks for the video
Question I already have a house on 2 acres of land and want to build on the back of the property while living in the existing house
Don’t know how the loan works in this case
That is a very good question. You would have to qualify to be able to carry your current mortgage while drawing on the construction loan amount. This is definitely an area I don't want to venture too far into without an mortgage professional. One thing to point out though is that they have recently brought in new legislation that allows for a secondary dwelling on many properties in Ontario.
Can you give an approximate amount of cash most people have on hand when starting, before making the first draw?
I only know what we were advised and what we did. The amount of cash on hand required before first draw will really depend upon your builder's requirements. For us we needed to pay for our building permit, 10% down to the builder and we were advised by our broker to do the septic, foundation and subfloor as well . Additionally, we were able to order and pay for a lot of things prior to our first draw since we had sold our house and were living in a trailer on the lot so we bought and paid for our windows, our appliances, a lot of plumbing fixtures etc. This was necessary for us since there were very long delays on all of these things during the time of our build but maybe wouldn't be necessary now. I would say in terms of cash on hand to get started (assuming you have paid off your lot) you would be good to have 15% of the build cost to get you to the first draw but again, this would be largely dependant upon any contract you have with your builder. You also want to minimize the number of draws you need to take since each one will cost you in appraisal fees, lawyers fees and lenders fees.
Good explanation, only comment is that you have to pay HST on your land.13% of 200k is significant cost...
Absolutely! I actually should do another video talking about the HST vacant land as well as the process to get the HST rebate (max of $24,000) when you build. Thanks for the idea!!
Nice video!
Thanks for the visit! Really appreciate you taking time to comment as well.
Excellent video and clear explanations, thank you! 2 questions that weren’t answered that I’m curious about:
1. Is the interest rate for a construction loan similar to that of a regular mortgage in Ontario?
2. You mentioned having a cash flow to pull from before taking out your first draw, and said that it wouldn’t be quite as high as a 20% down payment on a regular mortgage - could you elaborate on this? What percentage would be reasonable to start out with?
Thanks again!
Thanks for the questions. I will do my best to answer them accurately. The interest on the build loan would be similar to that of a regular mortgage. In our case we are charged interest on what we have drawn but we do not pay any of that interest until the build loan rolls over into a traditional mortgage once we get occupancy. So currently, as we build, we are not making any payments, just draws. Question 2 is a little trickier to answer. I know that before we took our first draw we had paid out about 25% of what we expect the total build to be. We had the foundation and the subfloor paid for as well as very large down payments on the cabinetry, windows and fireplaces, and build package. Our first draw was a big one and that was when the builder expects the largest payment. If you have any further questions I am happy to chat on the phone and answer them from my own experience. 613-888-9761
@@LisaTaylorElevateRealEstate Thank you so much for your response! I may reach out as we continue to do more research into this process. Much appreciated :)
What if my friends and I are planning to buy a lot but we don’t have the cash instead looking
into splitting it and getting approved to mortgage that lot ? can we do a building loan to build 2-3 homes slowly?
You can not get a building loan until you own the lot outright. You need to have no mortgage on the lot itself in order to borrow to build. Additionally, in most places you will not be able to build more than one dwelling on a lot.
What if you buy the land and pay for everything yourself. Is getting a mortgage more secure?
If you could buy the land and build the home without a mortgage, it would be a great way to go. I don't think the mortgage provides any further security. If I were in a position to do this I would have but many people are not!!
Any loopholes for not having to own the lot outright?
Sorry. None that I know of. It would have been nice to have the cash flow while building that we had to use on paying off the lot but, unfortunately, owning the lot outright seems to be completely unavoidable.
Good video. Consider a mic
Thank you for the advice. I do have a Yeti mic but it wasn't working correctly at the time. It does make a huge difference.