New Home Construction Mortgages - Contractor Build
Ben Schmidt of www.benschmidt.tv a Fredericton NB and Oromocto NB Real Estate Agent video blogs about new home construction mortgages
I'm very luck today to have mortgage specialist Shawn MacDonald of ScotiaBank on today, to discuss new home construction mortgages.
So, Shawn, lets pretend I'm in the Fredericton or Oromocto marketplace, and I'm looking to buy a new home. We've discussed my situation and we know how much I can afford. I also know nothing of construction, so I can't build the house myself. What are my options?
Well Ben, the first and quickest option, would be to contact a Realtor and visit the new home constructions on the marketplace. Builders often times are building on spec (building with the speculation of selling) and it is possible to purchase a new home like this. Often times the builder will have an allowance built into the price for you to pick your finishes. If you decide to go this option, financing would be no different than if you were purchasing an existing home.
Okay, well let's just say I want to be apart of the building design process from the beginning, and I want to pick all of my finishes. What then?
Then you can contact a builder and sit down with them to discuss the exact house you want. From house structure, to layout and design, to flooring and paint. At that point you will come to an agreement of price, as well as an expected closing date.
So the question remains, How do we finance this project?
That is up to the builder. The builder may choose two different options.
1) Turn Key - the builder will request of you a deposit to start. Then you do not have to come up with any more money, until the project is completed. Again, with this option, since you don't pay until the home is fully completed, financing would look much like a mortgage for purchasing an existing home on the market.
2) Contractor Progress Build - the builder will request from you, funds at different stages of completion. Typically speaking there are three times when you would need to release money (all negotiable). At 40% completed - This is when the house is dry. Foundation, framing, roof with shingles, windows, doors and ty papered.At 60-70% completed - This is typically around the time when electrical is in and you're about to drywallAt 100% completed - this is when the rest of the money is released and you are now in your new home, and paying a mortgage like any other.
You pay Interest only payments on the money advanced, until the home is 75% completed. That's when you add your principal amount to your mortgage and you can start to build equity.
If you have any questions about new home construction mortgages give Shawn MacDonald an email shawnl.macdonald@scotiabank.com
If you have any questions about new home construction or questions for a Realtor give me an email at ben.schmidt@me.com