Real Estate

Advantages to Pre-construction-Mortgage

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  • Mar 20th, 2017 1:13 pm
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[OP]
Sr. Member
May 18, 2015
860 posts
179 upvotes
Ottawa,Ont

Advantages to Pre-construction-Mortgage

Correct me if i am wrong but if I buy a pre-construction for say 300k in 2013 with 5% down to the builder(15k)...If its now done in 2017 and the exact same floorplan from the builder is now selling for 350k could I not go to my mortgage provider and request an appraisal in order to reduce the downpayment amount I would need to reach 20%??

Ex: Original cost (2013)=300k...would be 60k downpayment

2017 cost=350k (but I already have an agreement for 300k). 70k downpayment needed. But since it has increased in value by 50k I could only put 20k of my own money to reach the 20%?
7 replies
Deal Addict
User avatar
Dec 12, 2006
3980 posts
378 upvotes
No,

But you could had opened a HELOC now for 20k. ( ( 360k * 0.80 ) - ( 300k-60k) )
[OP]
Sr. Member
May 18, 2015
860 posts
179 upvotes
Ottawa,Ont
theguyz wrote:
Mar 19th, 2017 9:26 pm
No,

But you could had opened a HELOC now for 20k. ( ( 360k * 0.80 ) - ( 300k-60k) )
Can you elaborate on why the bank would still require the same downpayment amount?
Deal Addict
User avatar
Dec 12, 2006
3980 posts
378 upvotes
nikels21 wrote:
Mar 19th, 2017 9:29 pm
Can you elaborate on why the bank would still require the same downpayment amount?
Your paperwork you signed is 300k and you agree'd on 20%!

You are buying house still at 300k so nothing has changed.

The HELOC is bonus for getting into the startup of the build site....anyone entering now paying full 350k.
[OP]
Sr. Member
May 18, 2015
860 posts
179 upvotes
Ottawa,Ont
theguyz wrote:
Mar 19th, 2017 9:35 pm
Your paperwork you signed is 300k and you agree'd on 20%!

You are buying house still at 300k so nothing has changed.

The HELOC is bonus for getting into the startup of the build site....anyone entering now paying full 350k.
My only paperwork is with the builder. I dont have a mortgage yet as I havent taken possession
Jr. Member
Jan 15, 2017
141 posts
94 upvotes
No, you cannot. Down payment requirements are based on the purchase price of the property and not on the value of the property. Equity increases do not qualify as down payment sources.

From CMHC: Down Payment Requirements

Traditional sources of down payment include: Applicant’s savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of min. required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency).

Non-traditional sources of down payment include: Any source that is arm’s length to and not tied to the purchase or sale of the property, such as borrowed funds, gifts and 100% sweat equity.
Deal Addict
Nov 2, 2013
3933 posts
534 upvotes
Edmonton, AB
I'm going through something similar right now as I'm looking at a pre con and renting out my current home after its complete. The mortgage is done from the bill of sale, so the amount you agreed to when you first put your money down for the pre con unit.
Penalty Box
Feb 2, 2014
3096 posts
468 upvotes
Toronto
nikels21 wrote:
Mar 19th, 2017 7:55 pm
Correct me if i am wrong but if I buy a pre-construction for say 300k in 2013 with 5% down to the builder(15k)...If its now done in 2017 and the exact same floorplan from the builder is now selling for 350k could I not go to my mortgage provider and request an appraisal in order to reduce the downpayment amount I would need to reach 20%??

Ex: Original cost (2013)=300k...would be 60k downpayment

2017 cost=350k (but I already have an agreement for 300k). 70k downpayment needed. But since it has increased in value by 50k I could only put 20k of my own money to reach the 20%?
Just to confirm what other posters said, the lending value of the property is based on the LOWER of the purchase price or appraised value.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
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