Many people choose to build their homes from the ground up, in order to save money and design their dream home. But, when building your dream home, you have to think about how you will finance the big project. A construction mortgage is one loan option that many people settle for. A construction mortgage in Calgary is a loan that is utilized to finance the building of a home. The borrower is normally given the money in set amounts as every stage of the construction process is completed. Most of these mortgages involve payment of interest only during the building period with full repayments needed after the owner gets a certificate of occupancy.
Before lenders can approve construction mortgages, they must know all that will be involved in the construction project. This includes the materials, labour, blueprints, and any other costs that come with the building, and the time required to complete the project. Construction mortgages are usually variable-rate loans, which are priced according to the prime rate. The lender, borrower and contractor will set a schedule for fund withdrawal for every stage of the building process, and interest is applied on the money amount withdrawn. It is advisable to have the money released before every stage is complete, as this is economical and helps avoid future funding issues.
Many homeowners often prefer to get a construction-to-permanent financing plan in which the home construction loan is switched to a mortgage loan once the occupancy certificate is obtained. You can usually get a higher construction loan rate, and then get a better mortgage rate after switching to the traditional mortgage financing. It should be noted that with a variable rate, the repayments can fluctuate every month. Normally, rates of construction mortgage in Calgary are quoted on a prime plus basis.
Similar to traditional mortgages, the amount you can borrow depends on your financial position, such as your income and credit rating. Lending often ranges from 75%-95% of the construction cost. Some lenders will also offer a different loan for the land. The biggest advantage of a construction mortgage in Calgary is that it is often cheaper than obtaining a mortgage from an existing residence. Also, the cost of constructing your own home is lower than buying a new home.
Obtaining a construction mortgage will help you get the home of your dreams. However, if you are doing this for the first time, it is advisable to hire a mortgage broker to help you out. Mortgage brokers are experienced in this field and will help you get the best deal that suits your situation. So, whether you want a construction or self employed mortgage in Calgary, a mortgage broker can be very helpful.
However, do not hire the first mortgage broker you come across. Conduct some research to get a reliable expert in this industry. Ask how long a potential mortgage broker has been in this business and choose those with more than five years of experience. You should also ensure that the broker you hire to help you obtain a construction or self employed mortgage in Calgary is licensed, professional and friendly.