Personal Finance

Another mortgage question... About the 25% down

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  • May 18th, 2006 10:23 am
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Member
User avatar
Oct 2, 2001
452 posts
78 upvotes
Mont-Tremblant

Another mortgage question... About the 25% down

I already have a lot to build my house. The municipal evaluation of the land is 85k. If I sell the land, I think that I can get 100-110k from it.

Here is my questions :

Do I need to put another 25% cash on the house, or can I use the value of the land?

If I can use the value of the land to get my 25%, what is the highest mortgage that I can get? 400-440k from the selling value of the land or 340k from the evaluation? Do not take into consideration the max tha I can pay per month for the mortgage. I will not need more than a 200-250k mortgage.

Thanks!
5 replies
Deal Addict
Sep 1, 2005
2469 posts
4 upvotes
just to get this clear, you own a peice of land on which you want to build a house?

If the land can be apprased at the 100k, and you plan on building a house which makes the house AND the land worth $400k, as you already own the first 100k the mortage will ownly be 75% of the value of the home so no you wont need anymore down and wont need CMHC, as long as the land is free and clear. If your income can support it (TDS <32%) I dont think you'd have a problem getting a mortage for the 300k

Say you still owe 50k on the land, then the largrest home you could build would make the land and the home worth 200k without requireing more cash down. (100k mortage+50k still owed on the land)
Member
User avatar
Oct 2, 2001
452 posts
78 upvotes
Mont-Tremblant
Yes, the land is free and clear. Taxes have been paid and it's ready to built.

Thanks for you answer.
Deal Addict
Jun 8, 2004
2553 posts
1791 upvotes
Oakville
I don't think that's correct. Unlike buying a house already built, the value of your asset being attached to the mortgage is just the $100k value of the land. If you defaulted, there is no $300k house that the bank could repossess. Until the house is built, the most you should be able to get as a mortgage is $75k. Of course, you may be able to get an unsecured LOC based on your income and credit score to help build the house.
Deal Addict
User avatar
Mar 29, 2006
1182 posts
62 upvotes
sorry I have a n00b question... if he spends 300k on the 100k land to build the house, is it reasonable to deduce the resulting lot will be worth roughly 400k?
Jr. Member
Mar 14, 2004
188 posts
The mortgage that you could get would be based on the appraised value of the home after it is built. The take-out mortgage itself wouldn't start until the home is built. you can get a construction draw mortgage which will provide you with temporary financing given to you in at certain stages of the construction. Some banks will provide you with both the construction draw loan as well as the take-out mortgage.

A Mortgage Broker can find lenders that offer construction draw loans and take-out mortgages, and explain how they work.

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