Affording "to be built later" townhome

[kitkatneko]

I tried to look around for information about this without finding this case. While I (think I) understand how mortages work, I have questions about financing something that doesn't exist yet. Would anyone educate/enlight me?

I have not made any move to get mortgage approval yet but I am wandering around for houses and a construction project caught my eye.

The house:
The townhouses complex is to be finished by spring 2010 (I aim for fall 2010)
A nice unit with loft/patio... is $300k
Deposit for this is 30k (10%) payable in the next 90 days following purchase contract.
Left to pay when constructors is done 300-30 = $270k

I have enough saving to pay the deposit, money I was thinking using for down payment. I want to avoid the CHMC (sp?) fee and providing 20% down payment at mortgage time.


The questions:
I imagine that construction will ask for an approved mortgage when signing. is this generally the case?
Imagining so, how would the mortgage work? the goal being not to have to pay my rent AND paying back mortgage at the same time.

1. Can I delay the beginning of the mortgage itself? ie starting paying monthly payments.
1.1 When does paying back the mortgage start?
2. considering the deposit, should this be part of the mortgage request? ie am I request a $300k or $270k mortgage?
2.1 I have 45k now, thinking to grow it to 70k by nov. 09 so it is 20% of 300k. If I pay the deposit with this money, can I "substitue" it as down payment.
2.2 if not, and if I can delay mortgage, I will be able to save 20% of 270k (54k) by jan 2010. is there way to do this?

Alternatively, when do one pay the constructor? deposit being paid, when is the full amount usually due: end construction? start of construction?


I am not sure I made myself clear, but basically I am trying to find out what mortgage timeline options are available. Or I am just not ready?

Thanks in advanced for your answers or comments.

[Malicious]

I tried to look around for information about this without finding this case. While I (think I) understand how mortages work, I have questions about financing something that doesn't exist yet. Would anyone educate/enlight me?

I have not made any move to get mortgage approval yet but I am wandering around for houses and a construction project caught my eye.

The house:
The townhouses complex is to be finished by spring 2010 (I aim for fall 2010)
A nice unit with loft/patio... is $300k
Deposit for this is 30k (10%) payable in the next 90 days following purchase contract.
Left to pay when constructors is done 300-30 = $270k

I have enough saving to pay the deposit, money I was thinking using for down payment. I want to avoid the CHMC (sp?) fee and providing 20% down payment at mortgage time.


The questions:
I imagine that construction will ask for an approved mortgage when signing. is this generally the case?
Imagining so, how would the mortgage work? the goal being not to have to pay my rent AND paying back mortgage at the same time.

1. Can I delay the beginning of the mortgage itself? ie starting paying monthly payments.
1.1 When does paying back the mortgage start?
2. considering the deposit, should this be part of the mortgage request? ie am I request a $300k or $270k mortgage?
2.1 I have 45k now, thinking to grow it to 70k by nov. 09 so it is 20% of 300k. If I pay the deposit with this money, can I "substitue" it as down payment.
2.2 if not, and if I can delay mortgage, I will be able to save 20% of 270k (54k) by jan 2010. is there way to do this?

Alternatively, when do one pay the constructor? deposit being paid, when is the full amount usually due: end construction? start of construction?


I am not sure I made myself clear, but basically I am trying to find out what mortgage timeline options are available. Or I am just not ready?

Thanks in advanced for your answers or comments.

1) Mortgage payments do not start until after the closing of your house
2) $270k in your example, downpayment is not included in the mortgage principal.
3) 35k in 6 months? good luck

Full amount is due at closing. Bank will forward funds to your lawyer, your lawyer will pay the builder's lawyer... you get the all-clear... go pick up your keys.

[kitkatneko]

So just to confirm what you mentioned.

1. I do not pay anything but deposit until I receive the keys.
1.1 Then at this very same time, mortgage kicks in (a mortgage for which terms would have been locked at time of deposit (?))
2. if listed cost is $300k, deposit paid at contract time (-30k), 20% down payment consolidated before getting the keys (20% of $270k = $54k) I then would only require a (300-30-54=216) $216k mortgage?!?
3. now is march. 9 months to go until Jan 2010. 9 months to save $54k. Well according to my understanding and if construction ends in june 2010, I have more than 1 year to save $54 (and then get the mortgage)

Lastly, I understood there is 7 days (?) to close the contract (you know when signing up for the yes I will purchase that not yet built townhouse) what are the good places to have it reviewed?

Thanks!

[mself084]

So just to confirm what you mentioned.

1. I do not pay anything but deposit until I receive the keys.
1.1 Then at this very same time, mortgage kicks in (a mortgage for which terms would have been locked at time of deposit (?))
2. if listed cost is $300k, deposit paid at contract time (-30k), 20% down payment consolidated before getting the keys (20% of $270k = $54k) I then would only require a (300-30-54=216) $216k mortgage?!?
3. now is march. 9 months to go until Jan 2010. 9 months to save $54k. Well according to my understanding and if construction ends in june 2010, I have more than 1 year to save $54 (and then get the mortgage)

Lastly, I understood there is 7 days (?) to close the contract (you know when signing up for the yes I will purchase that not yet built townhouse) what are the good places to have it reviewed?

Thanks!

We just went through this/are going through the same thing...our home closes in early 2010.

1. Yup, you pay the deposit over 90 days and that's it until you get to the design centre about 6 months prior to closing. then you have to either pay for all of your upgrades, or pay a percentage and add the rest to your mortgage. ask your builder to make sure.

1.1. rate is locked/held for 18 months through certain banks (ask your builder). if the rate drops, u call your mortgage rep and they should lower it for you... ask this when u go for pre-approval.

2. your deposit should count as part of your downpayment on the mortgage.

3. good luck!

and as to your last question... part of our contract gave us 5 days to back out if we didn't secure mortgage financing/our lawyer wanted us to back out. for lawyers, u can ask your builder... in our package they had letters from 3-4 lawyers touting their services. after the 5 days are up, you are committed to the contract (this was the case with mattamy, anyways). at that point, u go in and pick up a signed copy of your contract and u wait anxiously :)

[QTheNukes]

Your 10% down would count as part of your 20% required to avoid insurance

So just to confirm what you mentioned.

1. I do not pay anything but deposit until I receive the keys.
1.1 Then at this very same time, mortgage kicks in (a mortgage for which terms would have been locked at time of deposit (?))
2. if listed cost is $300k, deposit paid at contract time (-30k), 20% down payment consolidated before getting the keys (20% of $270k = $54k) I then would only require a (300-30-54=216) $216k mortgage?!?
3. now is march. 9 months to go until Jan 2010. 9 months to save $54k. Well according to my understanding and if construction ends in june 2010, I have more than 1 year to save $54 (and then get the mortgage)

Lastly, I understood there is 7 days (?) to close the contract (you know when signing up for the yes I will purchase that not yet built townhouse) what are the good places to have it reviewed?

Thanks!

[CStone]

As other have said, your deposit count as your down payment.

For point 2.1 – I think what you mean is to have a down payment of 60K (20% of 300K is 60K, not 70K).

There’s something that I am not to sure about what you mean. You said you have 45K. Is that after the 30K deposit? If it is then I think you’re fine because 30+45K is already over 60K.

If you mean 45K before the deposit, then you should realize that after you pay that 30K, you are really left with 15K. To make the full 20% down payment, you would need an additional 15K from “growth” (60-30-15=15). It is not really realistic to “expect” to grow an additional 15K from a principle of 15K in about 1 year time. However, if you save aggressively in additional to some good luck in your 15K investment, then I think it’s not too bad.

[kitkatneko]

thank you all for your answers.

I am still not sure I understood the down payment calculation part.

right now I have $45 (I was saving up build a $60 so it is my down payment for a $300k mortgage)

if I go on with this, here is my plan

-I pay the deposit (balance: 45-30=15k)
-2010 comes, by June I save up 45k (from my earnings)
-Closing time, I get a mortgage with 45+15 = 60 down payment. as it 20% I skip the CHMC fees.

OR if deposit is part of the down payment.

-I pay the deposit (balance: 45-30=15k)
-2010 comes, by June I save up 15k (from my earnings)
-Closing time, I get a mortgage with 45+15 = 60 down payment. as it 20% I skip the CHMC fees.

OR do I need the down payment to be on the table right at pre-approval?

[mself084]

thank you all for your answers.

I am still not sure I understood the down payment calculation part.

right now I have $45 (I was saving up build a $60 so it is my down payment for a $300k mortgage)

if I go on with this, here is my plan

-I pay the deposit (balance: 45-30=15k)
-2010 comes, by June I save up 45k (from my earnings)
-Closing time, I get a mortgage with 45+15 = 60 down payment. as it 20% I skip the CHMC fees.

OR if deposit is part of the down payment.

-I pay the deposit (balance: 45-30=15k)
-2010 comes, by June I save up 15k (from my earnings)
-Closing time, I get a mortgage with 45+15 = 60 down payment. as it 20% I skip the CHMC fees.

OR do I need the down payment to be on the table right at pre-approval?


If you gave your builder 30k at time of signing, you would need another 30k at time of possession to reach 20% and skip the CHMC insurance on a 300k house.

[kitkatneko]

Thank you all. I think it makes more sense now.