By: Karyn Silliker, Meridian’s Aylmer Branch Manager
Whether you’re building your new home on a fresh plot of land or undergoing a major renovation or addition to an existing home, a construction mortgage may help address key home financing issues that arise with major construction projects.
Unlike builder mortgages, which fund the purchase of a newly built home from a builder, a construction mortgage funnels multiple draws of money over stages of the home’s construction. More importantly, throughout the construction, the mortgage consists of interest-only payments until the property is 100 per cent complete.
Here are some key elements to keep in mind when considering a construction mortgage:
- Understand the time and costs associated with your construction: When considering a construction mortgage it is important to work with your builder to get a realistic sense of the costs and timelines associated with your home construction. As unexpected costs often occur in construction projects, it’s highly recommended that you allot an additional 15% for contingencies.
- Understand how the funds will be advanced: While many lenders advance funds (this is known as draws) for a maximum of three instalments during the construction, Meridian offers unlimited draws on its construction mortgages. It’s important to note that once a request for a draw is made, the construction completed so far must be inspected by an appraiser.
- Understand the process for applying for a construction mortgage: Unlike traditional mortgages, construction mortgages take more time to review and approve and require more than just a recent notice of assessment. Many financial institutions require construction permits, blueprints, builder cost/contracts and land deeds to start the adjudication process.
To learn more about construction mortgages visit http://www.meridiancu.ca or come and visit us at Meridian’s Aylmer branch located at 36 Talbot Street West.