Archive for February 2009

Building your own home can be one of the most satisfying experiences a homebuyer can undertake, or, it can end up being the most aggravating.  The key to a successful build is understanding all the steps involved, and following through with the many details it encompasses.  This includes not only the construction process, but a firm understanding of the financing options available to you.

There are several types of new construction financing available to you as a home-builder – you have the ability to hire a contractor to construct your home, you may build it yourself, or you may purchase a newly constructed home and each will ultimately affect your financing.

Should you choose to hire a contractor you will require a builder or contractor mortgage (aka turn-key), where you as a customer have entered into an agreement with the registered builder to have them construct your home.  In this event you would require a completion mortgage or a progress draw mortgage. 

Should you decide as a home-owner to construct your own home, the same financing applies – you will require a completion mortgage or progress draw mortgage.

On the other hand, should you purchase a newly constructed home you will only require a completion mortgage as you are not taking possession of the property until it is 100% complete.

What is a completion mortgage?

A completion mortgage occurs when you have purchased your home through a builder and take possession once the property is 100% complete – in other words, you don’t require financing until the home is 100% constructed.  The customer would have to make a down payment, which is typically provided to the builder, in phases, for example:
You purchase a home for $400,000.00, your down payment may be due as follows:
1. 5000.00 at time of purchase
2. 5000.00 in 30 days
3. 5000.00 in 60 days
4. 5000.00 in 90 days
5. The balance remaining due on possession (which consequently takes the form of your completion mortgage)

What is a progress draw mortgage?

A progress draw mortgage differs from a completion mortgage in that portions of your mortgage are funded to you at specific times during the construction process.  A lender typically accounts for 3-4 advances in total; at roofing, lock-up, and completion.  It is important to note that when employing a progress draw mortgage you will require the assistance of a solicitor as they are the ones who advance the funds to the builder.
Before the solicitor is able to release funds to the builder, you will have to undergo Progress Inspection Reports, which detail the percentage complete prior to the advancement of these funds. 

Also note that you begin paying interest on the funds advanced at the time of advancement.  Your final advance (completion stage) is made when the home is between 97% and 100% complete.

What documentation is typically required for financing?

1. Written employment/income verification
2. Proof of down payment
3. Copies of all quotes for construction (if self-building)
4. Signed Contact between yourself and the builder
5. Full appraisal for the completed value of the home
6. Plans/House Specifications
7. If constructing a condo you will need projected condo budgets and financials
8. Solicitor Information
9. Other documentation may be required as applicable

Is constructing a new home right for you?  Contact one of our Calgary and Southern Alberta Mortgage Specialists at 1.866.955.9662 and they will work with you to determine whether a new build is best suited for you, and will work with you to determine your financing requirements.

MBN Mortgage
Your Source For Canadian Mortgage Rates and Current Mortgage News

The lure of a stunning gourmet kitchen or sparkling spa-style bathroom may have you chomping at the bit to begin a home renovation but if you heed the advice of experienced renovators, pre-planning and advanced preparation are the secrets to renovation success. Here’s a helpful checklist to get your renovation started on the right track.

Prepare a realistic budget

Determine how much you are prepared to spend on your renovation. Obtain a few quotes from professional renovators to see if your budget is realistic. As you refine your plans, your budget can be fine-tuned. Remember to boost your budget by at least 10 % for unexpected costs.

Decide what you want to do

For most people, this is the fun part – flipping through magazines and watching home decorating shows to get inspired. But it is also one of the most critical phases in any home renovation. Create a folder with photos and examples of what you hope to achieve and include a list of issues you want your renovation to resolve.

Arrange for financing

Get financing in place early to plan your renovation with confidence. Leveraging the equity in your home is often the best option. As a secured loan, you can usually obtain an attractive interest rate and with flexible repayments, this option can be easy on your cash flow. Other alternatives include refinancing your existing mortgage or arranging for a second mortgage on your home. To obtain the best possible terms, be sure to work with an independent mortgage professional who can shop the market for you.

Select the right team

You’ll want to entrust your project to people known for their quality of work. Depending on what your renovation involves, you may need a designer or architect  to come up with an overall design and plan.

Your contractor, who does the construction or subcontracts it to other trades people, will work with you or your designer to implement your plan. Ask for recommendations from friends and family, interview prospective candidates and always check references.

Stick with your plan

With a sound plan, reasonable budget, financing in place and a team that you trust, your renovation can get off on the right track. To keep it there, minimize changes and make yourself available for decisions so that your renovations can proceed on schedule. Remember to keep your eye on the prize- it won’t be long before the dust settles and you can enjoy your amazing new space.

According to the Canada Mortgage and Housing Corporation (CMHC), Canadians spend substantial sums on renovations – they project more than $50 billion will be spent on home improvement projects in 2008. To make sure you get the most for your renovation dollars, follow the lead of experienced renovators and plan ahead for success.

In the Federal Budget handed down on January 27, 2009 the Hon. Jim Flaherty offered up temporary tax credits for home renovations!

Flaherty also promised action to stimulate the housing sector. With housing starts begining to recover in Calgary, AB, the budget will surely have a positive impact on the Alberta economy.

A new home renovation tax credit would give up to $1,350 in tax relief on home improvement projects. The eligible expenses must be at least $1,000, but not more than $10,000, and the work would have to be done between Jan. 27, 2009, and Feb. 1, 2010.

The temporary credit would cost the government an estimated $2.5 billion for the upcoming fiscal year.

What role does your professional mortgage broker play? You would be surprised at the resources we can use to assist you in funding renovations- HELOC’s, mortgage refinances, and bridge loan mortgages can all be valuable assets to complete your home renovation project by using equity from your home, rather than cash from your savings.

MBN Mortgage wants to dispel the rumour that it is impossible to obtain mortgage financing.  While banks and lenders are keeping a tight grip on their money, there are still many deals to be had.  Simply put – banks don’t make money if they aren’t loaning out their funds, so…have good credit?  Looking to purchase a home?  Refinance an existing debt?  The possibilities are endless.

And the deals keep getting better – mortgage interest rates keep dropping in the hopes of boosting consumer confidence, so individuals purchasing homes right now have the ability to access fixed rates as low as 4.39% and variable rates as low as prime plus 0.80%, or currently 3.80%*. 

What does this mean for you as a homebuyer?  Your borrowing terms are extremely favorable – on a $400,000.00 mortgage in a variable rate product, your mortgage payment is roughly only $1770.00 per month as compared with a few months ago when rates were in the high 5% range with payments of approximately $2280.00.  For individuals looking to purchase or refinance, these favorable terms aid in your MBN Cash Management strategy, an integral component of your overall wealth accumulation and preservation plan.

Contact MBN Mortgage at 1.866.955.9662 to learn more about the mortgage products and financing options available to you.

MBN Mortgage
*current as of Feb 5, 2009

Your source for Canadian Mortgage Rates and Current Mortgage News