Real Estate

Include upgrades in new build price?

  • Last Updated:
  • Jul 29th, 2020 6:16 am
[OP]
Member
Dec 8, 2013
448 posts
641 upvotes

Include upgrades in new build price?

Does it make more sense to include or exclude upgrades in final new build price (assuming one could pay for them outright)? Does it have an impact on tax assessment and other costs associated with the sale price of a home?
11 replies
Deal Guru
Apr 11, 2006
11158 posts
5543 upvotes
Vaughan
I would think if you include it in the build price and then part of the mortgage, then you are amortizing over however many years you choose at current low mortgage rates.

Then when you choose to sell the home, presumably well before the mortgage is paid off in full, you won't have fully paid for the upgrades yet either.
Member
Mar 9, 2019
227 posts
118 upvotes
We paid for the upgrades separately and not included in the purchase price/mortgage because I was told that it'll affect property taxes later on. We had savings for the upgrades also so we just paid for them rather than tack them onto the mortgage.

edit: our builder also let us pay for all the upgrades by credit card so we got points.
[OP]
Member
Dec 8, 2013
448 posts
641 upvotes
kenchau wrote: I would think if you include it in the build price and then part of the mortgage, then you are amortizing over however many years you choose at current low mortgage rates.

Then when you choose to sell the home, presumably well before the mortgage is paid off in full, you won't have fully paid for the upgrades yet either.
One could potentially use a (he)loc to finance the upgrade costs and thus amortize them as well with low rates.
Deal Guru
Apr 11, 2006
11158 posts
5543 upvotes
Vaughan
agilowen wrote: One could potentially use a (he)loc to finance the upgrade costs and thus amortize them as well with low rates.
Most definitely, but i would be surprised if you could get a heloc rate that's better than your mortgage rate. Not to say it's impossible, but certainly less common.

In any case, i was moreso speaking of the option compared to paying it off outright and upfront.
Member
Jul 19, 2018
299 posts
185 upvotes
Mississauga
kenchau wrote: Most definitely, but i would be surprised if you could get a heloc rate that's better than your mortgage rate. Not to say it's impossible, but certainly less common.

In any case, i was moreso speaking of the option compared to paying it off outright and upfront.
If you are going to be upgrading and not having the price included in the total price you might be better off do the upgrades through a contractor. Will be cheaper and the workmanship would be better too.
Deal Guru
Apr 11, 2006
11158 posts
5543 upvotes
Vaughan
IrfanP53614 wrote: If you are going to be upgrading and not having the price included in the total price you might be better off do the upgrades through a contractor. Will be cheaper and the workmanship would be better too.
I know, but that's beyond OP's question, which is about builder upgrades specifically. I think it's safe to say that generally speaking, you can get it done for less outside or have more options in terms of material and finishes, but sometimes people want to walk into their new built home and have the prioritized upgrades done already even if it's a little bit more from builder. The upside, if I'm not mistaken, is that when the builder does the upgrades, it's all still part of the Tarion New Home Warranty, which may or may not be of value depending on what is being upgraded.

And to be clear, my stance was that it makes more sense to include it in the price/mortgage as per reasons I mentioned above in my first reply.
Sr. Member
Jul 15, 2019
702 posts
565 upvotes
The benefit of overpaying for upgrades with the builders is you roll them into your mortgage... today's $ are worth more than tomorrow's. Sure you are paying interest on that amount, but don't forget about time value of money.

edit: also your property taxes will be based on MPAC's assessment, so it doesn't matter if you pay the upgrades in full on the side of your purchase price or have them rolled in there. They are not copying down your purchase price number and taxing you on that... they do their own assessment.
Deal Addict
Nov 13, 2013
3825 posts
2376 upvotes
Ottawa
freeman93 wrote: The benefit of overpaying for upgrades with the builders is you roll them into your mortgage... today's $ are worth more than tomorrow's. Sure you are paying interest on that amount, but don't forget about time value of money.

edit: also your property taxes will be based on MPAC's assessment, so it doesn't matter if you pay the upgrades in full on the side of your purchase price or have them rolled in there. They are not copying down your purchase price number and taxing you on that... they do their own assessment.
This is one argument. But by this logic you should never put more than 20% down and have a 35 year mortgage. Interest rates are low sure but equity in your primary residence is tax free for life.
Deal Addict
User avatar
Jul 4, 2006
4240 posts
1012 upvotes
fogetmylogin wrote: This is one argument. But by this logic you should never put more than 20% down and have a 35 year mortgage. Interest rates are low sure but equity in your primary residence is tax free for life.
How would that work out if you put money in the stock market in the last 10 years compared to paying down your mortgage?
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Sr. Member
Jul 15, 2019
702 posts
565 upvotes
poorwingman wrote: How would that work out if you put money in the stock market in the last 10 years compared to paying down your mortgage?
You would only have to beat the interest rate paid on the mortgage... As the market rises, you gain the same amount of equity tax-free regardless of how much money you put in as a downpayment. The only reason you put 20% is to beat out the CMHC insurance... which gets tacts onto the mortgage. If it wasn't for that I certainly would say on a principal residence you should always put the least down possible.
Deal Expert
Feb 29, 2008
19122 posts
17465 upvotes
Tarrana & The Ri…
I’m getting upgrades right now and have paid the builder out of pocket. Would love to roll them into the final price. But this could be a problem for some people. Let’s say you spend 100k in upgrades but the appraisal comes in low and now you can’t afford the mortgage. Be careful when doing things this way.

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