Construction and renovation loans

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.

Construction loans including self builds people dream of building their own home. Some have construction management experience and many have none. The history of lending to self-builders can be described as checkered at best. Inexperience leads to cost overruns, cash shortfalls and schedule delays. This leads to a lot of handholding and conflict, between the lender and the  borrowers.

As a result most lenders simply won’t lend to self-builders and most require New Home Warranty Insurance, charge fees and charge a higher rate to offset the higher administrative costs. (we have lender that doesn’t require NHW).

One of the most common issues faced by  builders is understanding and budgeting for the “cost to complete” calculation of mortgage advances. In simple terms, the lender will always hold back enough of the approved mortgage loan so the project can be completed. Where this becomes a big issue is when the loan is relatively small compared to the overall cost of construction. For example, if the cost of construction is $400,000.00 and the loan amount is $300,000.00 and the project is at lockup (40% complete).   The lender will hold back the cost to complete (in this case 60% (100%- 40% completed) of $400,000.00 which is $240,000.00) So the draw at lockup would be $300,000.00 minus the cost to complete holdback ($240,000.00) for a net draw amount of $60,000.00.  Naturally this often means the owner builder is pushed immediately into  a cash crunch on first draw unless they properly budgeted in advance.   If there has been a land advance, that amount is usually deducted from the first draw, making the cash flow  situation even worse.

Rates run from prime plus 2.5% to prime plus 5% and fees are typically 1-4%. These rates are subject to changing market conditions of course and what rate you would get would be determined by your individual situation.

You can see it’s important to seek out an experienced mortgage broker that understands the cash flow issues, the application issues  and can help you develop a realistic plan that will save you a lot of heartache and expense.  We at the Lending Outlet have been arranging residential construction mortgages for 25 years and can certainly provide the necessary expertise to save you money, time and worry.   Call us to set up an interview.

We will pay referral fees to brokers.


Do Low Rates mean Higher House Prices?

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, (, 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,  ”

“We estimate an elasticity of house prices to interest rates that is below 10, implying that the drop in mortgage rates cannot account for the increase in house prices between 2000 and 2006. However, we do show that those credit conditions matter for the formation of prices. Our results do not support a view that credit market conditions purely respond to housing demand, but point instead to a directional effect that easier credit supply leads to an increase in house prices. ”

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 (

The Lending Outlet ( 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.

Kelowna Mortgage – Co-Broker Residential Commercial

Over the years the Kelowna Mortgage Lending Outlet has been able to help other Mortgage Brokers get deals done that have seemed impossible. It wasn’t that the deals were bad it was just a lack of knowledge or resources on the Mortgage Brokers end. If you are a new broker or you have hit a dead end trying to secure financing please call Tracy Charlton 250-862-1073, she has the knowledge and the resources to get deals done. Tracy will happily co-broker your deal and most importantly give your client the best chance at being financed. Residential & Commercial.

Are you Paying Too Much – Kelowna Mortgage Evaluation

Good morning Kelowna Mortgage Holders.

We hope you are enjoying the start of Spring.  Many of us are just now doing a spring clean up of our homes, getting rid of junk we never use, turning the sprinklers on re-adjusting the sprinkler heads, hosing off the driveway, cleaning the gutters etc … we are giving our home a once over making sure everything is working right.

Another thing we should be do doing each year is re-evaluating our mortgages and our debt structure.  Rates change and so do the options that go along with rate changes.  A very well known mortgage broker in the Vancouver area has been re-assessing his clients mortgages annually for years, in fact Oprah Winfrey herself has endorsed this mortgage strategy on a television show called Million Dollar Neighbourhood.

The Lending Outlet Kelowna Mortgage would like to invite you to take part in a Kelowna Mortgage Re-Evauation project free of charge.  We can visit your home or you can come into our office to discuss your current mortgage structure and see if you have any room to improve and to save money.  Our brokers have been doing this for a long time and have amazing relationships with over 100 lenders.  Sometimes we are even able to blend current credit card balances into a new mortgage giving you improved cash flow each month.  The possibilites are endless.  It is on these types of Mortgage re-evaluations that Kelowna Mortgage Brokers shine.

Just complete the contact form to the right of this post and we will get back to you within 2 hours.  You have nothing to lose.

Target Kelowna – Opening Soon

Get ready Kelowna Mortgage holders, Target Kelowna is opening soon.

Several eager shoppers were on hand as Target opened its doors in Vernon Tuesday morning.

The opening is one of 22 in Western Canada – today.

The soft openings include stores in British Columbia, Alberta and Manitoba and follow the opening of 24 stores across Ontario. As previously announced, Target plans to open 124 stores across Canada throughout 2013.

“Target is thrilled to be opening stores in Western Canada, providing a one-stop shopping destination that meets the wants and needs of our guests,” said Tony Fisher, president, Target Canada. “It was exciting to see the response to our Ontario store openings, which have produced valuable insights that along with our soft openings in Western Canada will help us to continue to deliver on Target’s Expect More. Pay Less. brand promise for guests across Canada.”

Locations opening to the public on May 7 include:

British Columbia (9)
Campbell River – Discovery Harbour Shopping Centre
Coquitlam – Coquitlam Centre
Cranbrook – Tamarack Mall
Delta – Scottsdale Mall
Kamloops- Sahali Centre Mall
Langley – Willowbrook Shopping Centre
Nanaimo – Nanaimo North Town Centre
Vernon – Village Green Mall
Victoria – Tillicum Centre

Alberta (10)
Calgary – Chinook Centre
Calgary – Forest Lawn Shopping Centre
Calgary – Market Mall
Edmonton – Bonnie Doon Shopping Centre
Edmonton – Mill Woods Town Centre
Edmonton – West Edmonton Mall
Grande Prairie – Prairie Mall
Red Deer – Bower Place
Sherwood Park – Sherwood Park Mall
St. Albert – St. Albert Centre

Manitoba (3)
Brandon – Shoppers Mall
Winnipeg – Kildonan Place Shopping Centre
Winnipeg – Southdale Centre

Locations opening to the public on May 14 include:

Prince George – Pine Centre
Calgary – Shoppes at Shawnessy
Stores will be open from 8 a.m. to 10 p.m. Monday to Saturday and 8 a.m. to 9 p.m. on Sunday. Guests will be welcomed into bright, clean stores with wide aisles, great guest service and a trend-right merchandise assortment. The majority of the 24 locations will feature a licensed Starbucks, as well as an in-store pharmacy designed to provide guests with superior patient-centered healthcare.

Target Kelowna is expected to be open this summer.


Flaherty – Mortgage Doublespeak and Linguistic Illusion

cash-houseLow Canadian Mortgage Rates

In a masterful bit of mortgage doublespeak and linguistic illusion the Minister of Finance stepped back into
The mortgage marketplace, warning about lenders engaging in prudent lending and not engaging in a race to the bottom.
This is an incredibly ironic stance for him to take since it was him and the Conservative government that encouraged the unprecedented loosening of credit underwriting guidelines 5 years ago.

Great Kelowna Mortgage Rates

Anyway, he once again misses the point entirely. He is obsessed with consumer credit quality and seems unconcerned that the rates are this low because the Bank of Canada and the US Fed are printing money at a record rate.
As anyone that reads this blog knows that Kelowna Lending & Mortage Co. The Lending Outlet has been offering 5-year money at 2.99 or 2.89 percent for the past couple of months. There is also an incredible 10-year rate at 3.69 percent.
This is good for borrowers, especially first time home buyers in Kelowna but is a sign of how weak demand is for borrowing outside the consumer sector.
Canada is lagging in business investment, junior companies are finding it impossible to raise cash, and the general industrial and commercial borrowing side is dead as a doornail.
For economies like the GTA, Quebec, and Vancouver to thrive the country needs to encourage the growth of export-oriented manufacturers. Instead of ragging in consumers, Mr. Flaherty should focus on repairing our manufacturing industry and thereby creating jobs.
A good job lets you repay a lot of debt Mr. Flaherty.

First Time Home Buyers Kelowna

Peachland Mortgage Broker

images-4In the summer of 2002, the agile Dominican superstar Alfonso Soriano became the first New York Yankee in history to notch 30 home runs and 30 stolen bases in a single season. Soriano broke another record that year: He was the first Yankee to strike out 157 times in a season. Asked to explain his habitual wild swings, Soriano produced a great line: “You don’t get out of the Dominica by taking pitches.”

There are lots of other lines about investing in stocks and real estate.  You can’t time a market.

The truth is they were lucky. If we really understood statistics we would know that in all systems someone has to win at some point.

So what is my point today?

Don’t try to time the real estate market. There are too many variables.  In a balanced local economy real estate will match inflation.

In down years it tracks below the inflation rate, but eventually it will catch up and hence a boom.

This also works in the inverse. A year where prices exceed the inflation rate invariably turn to a down market as the price revers to the inflation trend line.

What does this mean for Vancouver and Kelowna respectively? Vancouver has maintained its trend line with inflation over the past few years and maybe exceeded it slightly.  The Vancouver Real estate market is probably flat for 2012.

KELOWNA has been below inflation for 3 or 4 years and is probably headed for an upward correction in the next year as inventories decline and building permits stay low.

Village Heights at The Ponds Kelowna Upper Mission

Village Heights at the Ponds,

in the Mission Area of Kelowna is a great development of small single family homes priced for average income families and empty nesters.
What makes the Village Heights project successful is its well thought out cohesive design. The Kelowna homes are attractive, with good features and offer excellent value.


The most expensive home at Village Heights is about 520k including HST. The least expensive expensive home one is only $402,500 including HST.

So we can get you in to a brand new home here with 22k down and $57,000k in combined family income. So if you as a couple have  good credit scores and a stable jobs that pays you each at least  $13.70 an hour you should be able to buy a home with just 22k down.

The Lending Outlet has financed 17 homes at the Ponds in the past couple of years and everyone is happy with their purchase.

Call Billie Aaltonen Today – 1-250.575.5478

Village Heights Kelowna

What makes this newsworthy in my mind that in the past week they have sold 7 homes while the headlines talk about a slowdown in the real estate market in Canada.

This just proves my contention that if you offer good value, in the right price range and work with a good realtor and broker, you can find a house you can afford.

Check the Ponds out They are on Steele Road , go to the end of Gordon and up the hill. You’ll see the signs. Trust me you’ll be pleasantly surprised.

The Ponds Kelowna – Billie Broker, Billie Aaltonen

West Kelowna Mortgage

west-kelowna-mortgageAs predicted the Bank of Canada will keep rates low for the foreseeable future. This policy combined with the  (apparently) slowing demand in the residential real estate market will create an excellent

buying opportunity for those wanting to own their homes.

According to the bank the wild card in their policy choice is the US economic recovery which is well documented by the US real market blogger, Calculated Risk.

The real problem for the BoC is they are caught between a high dollar, export demand and imports such that they are dammed if they do or dammed if they don’t.

If they raise rates, especially increasing the differential between US rates and Canadian rates then there will be a rise in the Canadian dollar vs the US dollar which will damaging Canada’s vital export industries. In addition, as the dollar rises, imports become cheaper. Much of Canada ‘s inflation basket is made up from imported goods so the inflation number goes down, which pushes the need to raise rates back down. Confused?

Well the bank is a bit too. And we haven’t even factored in the tight mortgage lending policies that the Finance Department and OFSI have forced on lenders that are causing a major slowdown in the construction industry in Canada. Residential construction is a major economic driver for the Canadian economy and its loss will put further downward pressure on any plan to raise interest rates.

To bring this into focus for the ordinary homeowner, all that this means is there is little push on the BoC to raise rates ahead of any move by the Feds in the US. They have committed to keep rates where they are until 2014. So despite the few disclaimers in the BC’s policy statement, the truth is rates are going nowhere in the foreseeable future and if things don’t get going in the near term, we may even see a rate cut.