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Financing, Mortgages and Insurance What options are best for you and your situation?

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Old 2013-01-04, 11:52 PM
Outwest Outwest is offline
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Join Date: Jan 2013
Location: Vancouver
Posts: 3
Question Line of Credit VS mortgage for construction cost

My partner and I are going to build a new home and I'm looking for the best way to finance the construction cost. Neither of us have debt, and we are a young family about to have our first kid.

I currently own 50% of the lot, and it is paid for ($450,000 value) so I won't be needing a mortgage.
He is buying the other 50% of the lot and will probably get a mortgage in his name for $350,000, as he has $100,000 equity from his previous property.

I estimate that it will cost us $500,000 in construction to build our 33X120 detached home with a primary/secondary suite with an additional laneway house.
We hope to receive around $2,400/month in rental income from the secondary suite and laneway house.

How should we go about financing our home?
Should we keep a mortgage on his portion of the property, and do a LOC solely for the construction? Or should we just lump it together into on big mortgage? What are the pros and cons all the possible situations?
With $2,400 rental income, what do you think the monthly mortgage/LOC payment will end up being?
With interest rates set to hike sometime in 2013, would you recommend locking in?
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Old 2013-01-08, 01:51 PM
Tara Wilkins Tara Wilkins is offline
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Join Date: Jul 2009
Location: Burlington, Ontario
Posts: 185

You should speak to a Mortgage Specialist or Broker regarding Construction Draw Mortgages.

You will need a total of 35% down payment to be able to qualify for a Construction Draw, but it should like you have it. There will be a total of 3 draws during the construction of the home, 1st at framing, 2nd at drywall and the final stage at 99% complete. The line of credit will only be on the home while these draws are taking place, usually at prime + 1 or 2%.

Once the house is completed, you can now set up a Fixed Mortgage, Open Mortgage, Open VIRM, Closed VIRM on the home. This will pay off the current line of credit and wrap everything into one mortgage.

Sometimes during the build extra things come up regarding pricing, and you are left with more or less then you thought. So this will give you the ability to wait until all builder costs are completed in order for you to determine your exact mortgage.

I hope this helps.

message me anytime.

Tara Wilkins
Mortgage Specialist
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