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


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  #1  
Old 2012-05-13, 04:11 PM
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LeoMessi LeoMessi is offline
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Default New home upgrades and downpayment

Hello,

We are thinking of buying a new house and the process seems pretty confusing (and scary).

My first concern is the amount of upgrade you pay for the home.

Let's say the base price of the house is $350,000 and you need to give $10,000 deposit + 50% of upgrades. Let's say we end up doing 50K upgrades. So, at this point, we have paid 10K for deposit + 25K for upgrades for a total of 35K.

Once the house is built and we apply for mortgage, we are buying the house for $400,000 ($350K + 50K upgrades). At this point, we have paid 35K.

The question is, does this 35K count towards downpayment? I know for sure the 10K deposit counts, but I am worried about the money paid for upgrades.

Thanks,
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Old 2012-05-13, 04:47 PM
Aisha Aisha is offline
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It all depends on the builder and purchase price.

Most builders will require at least 20k in a deposit if not more. Some 40k or even 50k.

Upgrades will need to be paid in installments. They will normally only allow a percentage to go towards your mortgage so you need to take that into consideration if your getting pre approved for a certain amount. We had to leave 40% with at the decore center and the rest in post dated checks.

The part of deposits for upgrades do not come off your downpayments. Those are the extra costs you need to save for.

It is scary but your downpayments are spread out usually every other month or so. They usually need some at signing, another at thirty days, sixty days and 120 days.

I would almost consider a home that has many upgrades as a standard feature. And I would also do upgrades through the builder that you can't do yourself later on. For example smooth ceilings, oak staircases, larger windows and things like granite counters, hardwood floors and better doors later.

The cost of upgrades are nuts. Ours wanted 5600$ for granit in the kitchen we sealed a deal for the exact same at $2700.

I suggestalso try to negotiate for a few things in the contract. Extra pot lights, smooth ceilings etc can go into the agreement and the most they will come back with is a no answer. The sales people will tell its not possible but insist.

I also suggest once you seal the deal to go to their decor centre and ask for the price list on upgrades for your model, look around and really decide what you can do later and start shopping around.

Good luck

Last edited by Aisha; 2012-05-13 at 04:51 PM.
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Old 2012-05-15, 04:55 PM
Tara Wilkins Tara Wilkins is offline
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LeoMessi - YES anything you give to the builder as a deposit, and anything you give to the decor centre is all part of your down payment.

Your builder will give you an amendment in the very end to increase your new Purchase Price, and the amount needed for closing. This will reflect the 35k deposit given.

Save all receipts you have given to the builder and give them to your bank.

Thanks!

Tara Wilkins
Mortgage Specialist
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Old 2012-05-16, 11:29 AM
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Quote:
Originally Posted by Tara Wilkins View Post
LeoMessi - YES anything you give to the builder as a deposit, and anything you give to the decor centre is all part of your down payment.

Your builder will give you an amendment in the very end to increase your new Purchase Price, and the amount needed for closing. This will reflect the 35k deposit given.

Save all receipts you have given to the builder and give them to your bank.

Thanks!

Tara Wilkins
Mortgage Specialist
Really???? is this true? Im very curious now, because i was never told this by anyone. This would make a huge difference, i believe.
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Old 2012-05-16, 08:36 PM
Aisha Aisha is offline
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I've never heard of upgrades going towards a downpayment. Upgrades are just that upgrades. They are extras. Maybe some builders are different who knows so a definite answer can't be given until you speak to a specific builder.

For us our initial deposits of $50,000 (over a seven month period) does get taken off the cost off the house and when we went to the decore centre they didn't say okay you spent 10,000 in upgrades so we will just not take the last deposit cheque to the bank

The best thing I suggest is todo your homework. Go to builders ( better during the week when it's quieter) and ask a million questions. They each have their own set of rules of course, but you will see a lot of similarities.
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Old 2012-05-16, 09:48 PM
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Upgrades can be rolled into the price of your home, or paid for individually outside of the purchase agreement.

When included with the purchase agreement they are covered with Tarion warranty and it gets added on to your mortgage.

When outside of it, they may not be. This is how it has worked with several of the houses we have been involved in.
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Old 2012-05-17, 08:35 AM
Stormwatch Stormwatch is offline
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Ok, so if your upgrades are rolled into your mortgage. The money given to your builder for the deposit on upgrades is part of the down payment?


Ex) builder deposit is 10%
House is 500k. So 50k deposit given

50k in upgrades. Builder takes 25% deposit on upgrades 12.5k given


Does that 12.5 get added to the 50k already given?

So house cost is now 550 and you've given a down of 62.5?
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Old 2012-05-17, 06:41 PM
Tara Wilkins Tara Wilkins is offline
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Stormwatch that is correct.

You need to check with your builder first, but they should be providing you with an amendment after your upgrades, or else there would be NO reason to pay for any of the upgrades and you can just add the amount all to your home.

If you purchased a home for $500,000 and you have given $50,000 deposit to the builder in the beginning, your current down payment is $50,000.

If you do $50,000 in upgrades, and give the "decor" centre $12,500 - your NEW Purchase price is $550,000 and your total new Down Payment is $62,500.

Prior to closing you will need to ask your builder for an amendment to the Purchase and Sale agreement. It will be the first page of your agreement. It will say "delete purchase price of $500,000 and INSERT new purchase price of $550,000". Then it will state amount needed to close on the house, or new amount of mortgage needed, "delete amount/funds needed to close of $450,000 and INSERT new funds needed to close of $487,500".

Not all builder will do this - so make sure prior. Any money given to the builder Should be counted towards your Down Payment....or there would be no reason to give them any money.

This will increase your purchase price as well, which will effect your Land Transfer Tax on the home from $500,000 to $550,000. But it is totally worth it to us to have the upgrades on our mortgage.

I hope that helps. Contact me anytime.

Tara Wilkins
Mortgage Specialist
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  #9  
Old 2012-05-21, 09:24 PM
ultraman ultraman is offline
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if you put all the upgrade into your mortgage, will it also increase your property tax? Will it better to pay with your loc?
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Old 2012-05-21, 09:31 PM
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Property taxes are based on an assessed value by the Municipal Property Assessment Corporation, not the sale price of the home.

http://www.mpac.on.ca/property_owner...uilt_homes.asp
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