The uptick in construction in boom markets like Vancouver and Toronto has proven to be especially attractive for enterprising investors, and a Dominion Lending Centres
agent lent some insights on what real estate and mortgage professionals should watch out for when guiding their clients who are buying into new developments.
Chief among these items are the interest rates, according to Pauline Tonkin of the Coquitlam-based branch DLC
Innovative Mortgage Solutions.
“Depending on the lender and timeline, [the actual fixed] costs may be unclear for several months,” Tonkin wrote in her guidance piece posted on the company’s website. “[Things] can change along the way with financing rules or the market.”
“I always keep in touch with my clients and within a few months of completion we revisit the overall plan and make some decisions,” Tonkin said. “[The] down payment may need to change, the property value may shift or [the client] may have experienced a life changing event.”
Tonkin also advised mortgage professionals to recalculate the Goods and Services Tax figure that the client would most likely get from an online calculator, and take into account any possible allowances and discounts. This will help either buttress the original numbers or help the buyer get a better deal, as well as prevent the client from encountering any nasty “hidden charge” surprise along the way.
In addition, cities set the property taxes for every development, and this might take a while. Tonkin argued that it is incumbent upon the broker to review the options that the client might consider.
“More and more lenders are using a percentage of the purchase price to determine the property taxes at the time of application unless confirmation of taxes can be provided by the city. In some cases this can be .5%-1.75% of the purchase price which can make a difference to qualify for financing,” Tonkin said.
“For financing purposes, not all lenders will consider an assignment as the new purchase contract is between the original buyer and the new buyer and not with the developer. Some lenders will only consider the original price and the new buyer will have to pay the difference between the two amounts as the down payment to complete the purchase. Lenders who consider the new price will require a full appraisal to confirm the current value of the property,” she concluded.
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