If you plan on building your own home or are planning a major renovation make appointment with us. We can explain draw calculations, budgeting for those draws, appraisal issues and guide you through these and a myriad of other potential pitfalls.

Cost to complete means that the lender always holds back enough of the approved mortgage to complete the project. This calculation can create a lot of problems for inexperienced owner builders who miscalculate the draws and end up in a budget shortfall. Basically, the lower the loan amount in relation to the actual cost of the build, the bigger the holdback. Just because you’re at 45% complete does not mean you will get 45% of the approved loan amount.

For example, if you have a 500,ooo draw mortgage approval and you have a construction budget of $600,000.00. If your first draw is at lockup (typically 45% complete) then your first draw would be $500,000 minus the cost to complete which is 55% of $600,000 ($330,000). This means your first draw would be $170,000 less any earlier loan amount advanced.

So you can see the potential issue, you’ve spent 45% of $600,000 ($270,000) but only get $170,000. The 100K shortfall can be a nasty surprise if you’re not prepared. We have had this problem and many others come across our desks so the sooner you involve us the less likely it will be you will run into avoidable issues.

If you are in this situation, give us a call, we have solutions.

Over 25 years experience in construction lending, we CAN answer your concerns.

The short answer is, a little bit maybe.
In an interesting study, that I found in reference section of  the Bank of Canada’s Mortgage Securitization Report, (http://www.bankofcanada.ca/wp-content/uploads/2015/12/fsr-december2015-mordel.pdf), it was found that mortgage rates only affected prices by a negligible .45%. The report showed a very weak link between mortgage rates and prices which I thought was counter-intuitive. However there were two items that had big influences on price,  access to credit and household income. I quote from the authors conclusion on page 25,  ”

So easy lending policies and a good employment outlook vs low rates are bigger factors in driving house prices up. The original report is here (http://www.nber.org/papers/w17832.pdf)

The Lending Outlet (https://lendingoutlet.ca) has access to the Chartered banks and their smaller competitors so we have access to a variety underwriting policies that may suit your needs. We can help when your bank won’t.