Results from the 'Home Building' category
October 02, 2017
What is a Draw Mortgage?
A Draw Mortgage is a method of providing financing to purchasers who wish to build a new home. This method positively addresses some of the negative issues associated with another commonly used funding source, the Completion Mortgage. While there are some proponents of Completion Mortgages, there are some pitfalls associated with it; whereas a Draw Mortgage helps alleviate these disadvantages.
With a Draw Mortgage, the bank allocates funds to the builder as the construction of the home progresses. The mortgage itself takes effect upon the first draw of monies, which is done at the early stages of construction. This means that the interest rate is locked in and Title to the home is given to the purchaser. Usually only the amount required for that stage is advanced to the builder by the bank.
With a Completion Mortgage, an approval is received at the beginning of the purchasing process but it doesn’t take effect until the possession date, so the interest rate isn’t locked in and no Title is given. This is quite risky, especially when interest rates are rising. With this type of mortgage the entire amount of the mortgage is advanced to the builder at possession.
Most banks or mortgage brokerages offering Completion Mortgages will only hold the interest rate for 120 days from the date of the approval. This is an immediately cause for concern with anyone who is building a home, as it takes longer than 120 days for construction. Short timeframes for interest rate holds such as these don’t really work when constructing new homes.
Since these banks and brokerages have such short interest rate holds they require the purchaser to be ‘re-approved’ just prior to possession. This can be a hardship for some families, whereas a Draw Mortgage doesn’t require purchasers to qualify twice. This is an important fact for purchasers who are planning or expecting a child, or if a large purchase such as a vehicle may be on the horizon. In these scenarios the mortgage re-approval may be negatively affected as the available household income is usually reduced while the purchaser is on maternity leave or when trying to make payments on a new loan or increased credit card debt.
In the unfortunate event that a builder runs into financial difficulty and they can’t complete the home, the homeowner who has a Draw Mortgage can rest easier, because they have Title to the home as soon as the funds are allotted to the builder. This is a significant difference, because not only is their deposit secured, but they also own the home up to whatever stage it has been completed to. This is not the case with Completion Mortgages.
As the build of the new home progresses, draws from the approved mortgage will be made in stages:
- When the home reaches foundation or framing
- When siding or drywall installation are in place
- Once the interior finishing’s begin to be installed (flooring, doors, etc)
- And finally, when the home is complete
To ensure work on the home is completed as required, third-party (lender) inspections are made at each stage to ensure everything is on track and completed. The build has to pass each inspection before the next draw will be permitted. This assures that the homeowner only pays for a progressive build.
There are even some builders, such as Parkwood Master Builder, who will pay the Draw Mortgage interest and any associated costs, such as legal fees, associated with this mortgage. Will the builder you may be interested in do this for you?
When building a home with Parkwood Master Builder and using a Draw Mortgage, the homeowner endures no extra cost. Parkwood is happy to provide homeowners with full coverage of any inspection fees (as required), legal fees (if their lawyer is used), as well as pay any accumulated interest or insurance on the mortgage up until possession.
Knowing that the financing is in place throughout the build process can provide a lot of peace of mind and allow the homeowners to relax while dreaming of living in their new home, whether it is a Parkwood home in Edmonton and vicinity, or otherwise.
All that is left to do is to get packing!
April 18, 2016
It’s true the uncertainty in the economy is making some Albertans anxious about their financial security. It may seem like a daunting time to purchase your first home or upgrade your existing one. But the current environment is also creating opportunities for savvy buyers to get into the market or increase their real estate portfolio. Don’t let fear drive your decision making! Focus instead on your current situation and your long term goals. We have collaborated with our friend Diana Lee of the Mortgage Minds on our top tips to help you get the most out of your spring market opportunities!
1. Consider Outside your Preferred Neighbourhood – This will generally allow you to have more square footage at a lower price. This doesn’t mean you have to be on the opposite side of the city … simply consider a looking 5-10 minute drive outside your preferred area, or in a similar subdivision with slightly different amenities. Although you might add to your commute , you could potentially save thousands on your home purchase.
2. Take advantage of Low Rates – We expect another year of record low mortgage rates. Taking advantage of these rates can save you thousands of dollars of interest and increase your purchasing power when you find that house you love. Lower rates mean lower mortgage payments, which allow your monthly cash flow to be more comfortable. Mortgage Brokers have access to dozens of different lenders, banks and credit unions where often rate specials can be offered, as well as different mortgage products that cater to your financial situation.
3. Keep and Open Mind– Fell in love with a mid size show home with a PERFECT floor plan but it doesn’t fit your budget? Instead of passing up on the opportunity to become a homeowner, why not consider a town home, condo or duplex by the same builder in your price range? The options are endless and they may have similar floor plans, that are more affordable for you for now. There is an abundance of inventory on the market and it is always changing. That being said, if you don’t find the home for you, take your time, it is after all, probably one of the largest investments you will make!
4. Use Existing Equity – Really want to purchase a new home but don’t have the liquid assets saved up? Do you currently own a home and have equity? If so, you can access up to 80% of the value of your home and use this as a down payment on the new purchase. Whether you refinance your existing mortgage, or use a Home Equity Line of Credit, there are many advantages of using the equity. As long as you qualify on the new property, using the equity in the existing home can be an acceptable source of down payment.
5. Adjust Must-Haves – We want you to have your dream home. It’s important to us. However, adjusting your must-haves list to align with your price range can be realistic at times. The end product might be slightly different than what you imagined, but will still work for your lifestyle and family. For example, if you have 5 must-haves in a home, prioritize those and pick your top three. Perhaps the other two can be a renovation project a few years down the road. Also, always check with your homebuilder about what comes as a “standard” when you buy. Parkwood offers several “standard” features that are often considered “upgrades” from other builders. Some of these include Convection Oven with Steam-Clean Option, ‘Energy-Star’ rated Dishwasher & Microwave, along with our ‘Energy-Star’ rated’ Front Load Washer & Dryer. Also, every Parkwood home comes equipped with high-tech Programmable ‘Touch-Screen’ Thermostat with indoor humidity display, providing automation for both Heat & Cool, and is also ‘Wi-Fi Enabled’ for complete control from Smart Phone, or Tablet.
Questions? Want more information on any of the above?
Contact our Parkwood Sales team at [email protected]
Diana Lee at [email protected]
December 11, 2015
The new regulations, which take in effect February 15th, will increase the minimum down payment from five to 10 per cent on the portion of the home’s price that’s greater than $500,000.
The minimum down payment on the first $500,000 of the home’s price will remain at five per cent.
Canadians who already hold mortgages will not be affected by the new rules, Morneau said.
Under the new rules, a $700,000 home would require a minimum down payment of $45,000. The $45,000 would consist of a five per cent down payment on the first $500,000 of the home, added to a 10 per cent down payment on the remaining $200,000 of the home.
For more information, click here or contact one of our Area Sales Representatives.
November 20, 2015
The trend of developing secondary suites is gaining momentum in Edmonton and across Alberta. With the high cost of living in our province, making the most of your space isn’t just nice—it’s essential.
Whether you’re looking to decrease your mortgage payments with rental income or create a cohesive multigenerational home, a secondary suite might be the right choice.
Multigenerational and Multi-family Homes
Regardless of whether it’s for cultural or economical reasons, having multiple families or generations under one roof comes with some unique challenges. How do you make the most of your square footage while maintaining some level of privacy for everyone?
Simply trying to fit a second family into a single-family home is less than ideal. With so many different schedules and preferences to manage, heads are bound to bump. An ideal situation would be to build a brand new home with a customized multi-family layout, however, there are other less-costly ways to make your home work for multiple families.
A separate basement, garden, or garage suite could be added to an existing single family home, (if the conditions permit) or as an add-on feature to a new home. These types of suites are self-contained and have a separate entrance, which will provide privacy and autonomy while still maintaining that feeling of family closeness.
An option for multi-generational families is what is traditionally referred to as an ‘In-Law Suite;’ a part of the home that contains a bedroom and adjoining bathroom typically located on the main floor of a single family house. These layouts are ideal for an elderly relative who may not be mobile enough to handle stairs.
Parkwood can help plan your ideal multi-generational or multi-family home, either by custom designing a new home to meet your specific needs or by adapting one of our existing plans. We also have models that have a specific In-Law Suite on the main floor and several other models that have the provision for adding one.
Income Suites and Building Standards
Secondary suites aren’t just great for big families, they can also help supplement your mortgage payment through rental income. In fact, a recent announcement from CMHC allows 100% of rental income from a legal secondary suite to be used when qualifying for a mortgage, which is yet another reason to consider this option. The City of Edmonton also has grants of up to $20,000 available to eligible homeowners towards Secondary Suite construction costs under its Cornerstones II grant program.
As we mentioned earlier, Secondary Suites can include basement suites, garden suites (a self-contained separate building on the same property) or a garage suite (a self-contained suite above or attached to a detached garage on the same property). As there are limited locations in Edmonton that can actually accommodate garden or garage suites, we’ll concentrate on the more common basement suite.
All Basement Secondary Suites must meet local zoning requirements (not all neighbourhoods allow them so check with your local authority) and must be constructed according to the current Building Code. Code requirements include fireproofing and soundproofing, a separate furnace and duct system for the suite, adequate windows and exits, a separate entrance and more.
Because of the Code requirements, retrofitting an existing basement space into a legal separate suite can be quite a challenge. The requirements can be much more easily accommodated in a new home build where spaces have been designed specifically for the separate suite. Additional features such as larger windows, a separate laundry room, raised ceiling height and high quality finishes can be easily added and can raise the potential of the suite. Beautifully designed secondary suites not only bring in more rental income but they are more likely to attract responsible tenants who respect their home and will lease for longer periods.
Parkwood has a number of models, such as the Avalon II and Avalon III, which have been specifically designed to accommodate a secondary basement suite. These homes have separate entrances leading directly to the basement and can be purchased with the secondary suite included or can be roughed-in for future construction of the secondary suite. We can also adapt most of our standard model plans to accommodate a secondary basement suite and will ensure that your basement suite is well-designed and meets all Code and Bylaw requirements. Want to find out more? Let’s talk.
You can learn more about the requirements for secondary suites in Edmonton at the City of Edmonton website. Find information regarding the CMHC Secondary Suite Mortgage Qualifications here. The requirements for the City of Edmonton Cornerstones II Grant Program are available on edmonton.ca.
October 06, 2015
“What’s the price per square foot to build a house?”
This is often the first question people ask when they’re looking to build a new home in Edmonton, because it’s how we’ve all been taught to understand the housing market. But is it really the right question? Real estate can be confusing, especially with so many technical terms being thrown around. Amidst a lot of technical jargon, price per square foot can seem like an easy and concrete way to measure value.
“How do I Calculate the Square Footage Price of a House?”
Home buyers know they can multiply the total home square footage by the price per square foot to calculate the expected cost. Or conversely, divide the price by the number of square feet to find the cost per square foot. While this is true, is it really an accurate way to determine the home’s value?
Imagine you’re buying a car. What do you look for? Maybe you need all wheel drive, power steering, and a backup camera, and are willing to pay more for a respected brand. If we follow the price per square foot argument, a Kia Sedona should cost more than a Lamborghini Aventador. There’s obviously a vast difference between these cars, and the same can be said with homes. The contents and quality of the build are what determine true value.
When looking at the price to build a house, there are costs that are comparable across similar properties, regardless of size, location, or builder. Excavation, pouring the foundation and basement, driveway prep and concrete costs, and basic building materials are fairly consistent. It’s the contents and quality of that new home that really matter. For example, if you compare two homes of the exact same size, but one has an extra bathroom and kitchen, the added fixtures will increase the price per square foot. Larger and additional windows, quality of appliances, and types of exterior finishing materials all affect this cost as well.
Does Size Matter?
Larger houses sometimes have lower costs per square foot, because those base costs we discussed above are spread out over a larger area. But is bigger always better?
Ultimately it’s not just about size, but what you do with that space. Two houses with the same square footage could feel radically different once you step inside. Traditional two-story houses might be larger on paper than modern open to below house plans, but feel more closed-in and include floor space that isn’t always needed or useful.
It’s About Value, Not Cost
As a new home buyer, it’s easy to mistake cost for value.
At Parkwood we understand this struggle, and aim to provide value by designing so that space is not wasted, thus making the most of every square foot. Real home value is measured through factors like finishes, layout, and customization, and not just the cheapest price.
Want to learn more? We’d love to chat about building your Edmonton dream home. Contact us now.
July 07, 2014
Cornerstones II is a Secondary Suite program set up by the City of Edmonton to increase safe, affordable housing options for lower income households in Edmonton.
Our in-house design department is able to add secondary legal suites to many of our plans. Please contact your nearest Area Sales Manager’s for more information or visit the City of Edmonton’s website.