Mortgage Questions for Pre-Construction Condos

[ForzaItalia]

Bought a condo last week that won't be built until Feb 2014. Before that I was pre-approved by my bank and I know all about the 120 day rule.

I was wondering if there are any financial institutions out there that would promise me anything relating to today's rates. I know I'm 3 years away until occupancy and am probably grasping at straws here but just wanted to see what you guys and gals had to say.

Essentially, is a 3 year away occupancy simply just too early to be looking for mortgage options?

 

[NikoS]

The developers often have a bank that will provide appropriate pre-approvals for their project... and you are usually required to submit the proof of mortgage approval to the building. The actual mortgage will likely be much different than the pre-approval obtained because of the time frame.

 

[MarcFromOttawa]

I was wondering if there are any financial institutions out there that would promise me anything relating to today's rates. Essentially, is a 3 year away occupancy simply just too early to be looking for mortgage options?

No and yes.

 

[ForzaItalia]

No and yes.

Straight to the point.

So what's the earliest time I should be looking at mortgages before my occupancy date?

 

[CanadianDriver]

at interim closing or immediately after receipt of a letter regarding final closing date.

 

[Torontotony]

To the OP...

The most prudent advice is to approach the lender who has the Capped Rate program with the developer, immediately. The interest rate that will be offered will not be very competitive looking as compared to interest rates offered today, but like a previous poster indicated, the mortgage at closing (3-4 years from now) will look very different from the approval today.

Furthermore, even if you intend to put 20% down into the purchase, you are best advised to seek out an approval on a high-ratio mortgage. The rationale behind this stems from the fact there is definite uncertainty with future values of real estate. Given this uncertainty, and the fact that most lenders will not appraise a property (a requirement on most conventional mortgages) until the mortgage is ready to go live (again 3-4 years from now) obtaining a High-Ratio mortgage approval today, means that CMHC/GEICO/CGI (the insurers) will guarantee today's purchase price/lending value as far out as the actual closing date.

I have seen situations in the past where shifting market values affected the appraised values on properties acquired several months or years before the actual closing date. You want to protect yourself in the event market values decrease as you would be required by the lender to make up the shortfall between the purchase price and the appraised value out of your own resources. Furthermore, the developer would force you to close (at the contracted purchase price) even if the appraised property value was substantially lower than the purchase price.

Hope this helps,

Regards,
Tony