We’ve all heard about the traditional mortgage, but are familiar with a better option if building a new construction? In this episode, Natalie and her guests discuss new construction and draw mortgages that can come from that process.
In a draw mortgage, the dates of funding are different. Standard mortgages start funding the date you take possession of the home. In a draw, the fund starts at certain stages of the build process. Typically, it is your builder who defines if you look at a completion build mortgage or a draw mortgage.
The type of contract you’re working with will define the type of mortgage application you begin. With a Draw mortgage, once the initial draw funds at foundation, the interest rate locks in for you for the entire next year until your home is built. Then the five-year term will start when you have occupancy. Thus, you’re locking in the mortgage rate for 6 years.
If you are thinking of building, commercial, custom, or private, the first conversation before even looking at pieces of land is to talk to your mortgage professional. Get your prequalifying set up and be ready to go. Then, when you find that piece of land, you know exactly what to do to get it because your mortgage professional already knows what you need.
“Always be as honest as possible with your mortgage professional, everything triggers a conversation. Reach out to your professional, build that trust and be completely open with them.”
If you’re withholding information, that could be robbing you of a better opportunity, or another product or a way of keeping you out of trouble. It’s about having the right conversations and understanding what the ultimate goal is. At the end of the day, do we want to be knee deep in the trenches of the reno with you, we don’t need to. We do have to take everything at risk. Those are the things we need to know about and the bank wants to be if major structural renovations.
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