The thought of building your own home can be quite exciting. After all, when you are building your own home, you get to decide so many minor and major aspects of it right from the start. Although the thought is pretty exciting, financing such a major undertaking can be quite a challenge. Let’s face it, most of us do not have that kind of cash stashed away somewhere to cover the construction cost of our home. This means we definitely need to borrow money and start our search for the best mortgage broker in Edmonton. But before we divulge into understanding the mortgage rates, refinancing options and other critical aspects related to borrowing from an Edmonton broker, let’s take a step back. Here are a few important tips that you need to keep in mind when borrowing money to build a home.
Standard Mortgage
If you are building your home, a standard mortgage may not be an option for you at all. For a home buyer, it is comparatively easier to get the mortgage approved as long as they have a decent income and good credit history. However, when it comes to building a home, you practically are asking the lender for money for something that doesn’t exist yet which makes you a high-risk mortgage seeker. In addition, construction is regarded to be risky by most mortgage providers and may be less willing to lend.
Construction loans
So if the doors of traditional mortgage are closed on you, does that mean you have no avenue left? Certainly not. If you plan to build your own home you will need a more specialized financing avenue – A Construction Loan. Construction loans are also termed as a self-build loan and are typically a short term loan that is used to cover the cost of building your home. These loans have variable interest rates which are generally higher than traditional mortgage loan rates. Once the construction of your house is completed, you can think about contacting Edmonton’s best mortgage provider for refinancing your mortgage and turn it into a permanent mortgage. Another option is to get a new loan and pay off the construction loan.
Prepping to get a construction loan
Any kind of borrowing requires a lot of paperwork. Before applying for a construction loan, there is a lot of groundwork that needs to be done. First, you will need to furnish solid proof that will make your lender believe that your home-building project is legitimate and low-risk. Second, you will need to provide clear timelines, budget and a comprehensive list of your construction details such as your building plan, the type of materials you are using for building, insulation and ceilings.
Downpayment
Once you are done with the document preparation, the next big part is the downpayment. As construction projects are perceived to be high-risk as far as the mortgage is concerned, many mortgage companies will demand as high as 20-25 percent downpayment for construction loans.
Although building your home from scratch can be extremely rewarding, it is a big project and requires a professional’s guidance to get through the complexities and intricacies of financing approvals. Talk to a licensed mortgage broker from Edmonton based Mortgage Makers who are specialists in dealing with all kinds of mortgage-related aspects. Whether you are looking to build a home in Edmonton or are looking to consolidate your debts, get the best mortgage rates and excellent customer service with us.
