Vancouver condo pre-sale purchases – Get mortgage early
This is a note to those who have entered into contracts to purchase pre-sale properties and are going ahead with them vs. walking away from deposit and hoping not to be chased by the developer.
It is strongly recommended to start the financing process early, before a closing date has been communicated to buyers in that many contracts stipulate that the developer is only required to give 10 business notice, which is extremely short notice. Confirming that a mortgage can be arranged can start as early as 3-4 months before the closing date. It is important to start early as some documentation that may be required by the bank to confirm they will lend the money could take some time to get. For example it may be documentation that has not yet been received back from revenue Canada, tax information that is with your accountant and they are on vacation, you have it but have misplaced it, etc. Depending on the situation the client may need to have a family member co-sign or be a guarantor on the mortgage and this requires additional time to arrange as well.
Something else that has been happening more recently is that the purchase price that was agreed to in the past (contract purchase price) is considered to be less than “current market value” today. This creates some challenges as banks typically only lend on the purchase price or appraised value (i.e. current market value), whichever is less. So if the current appraised value is less than the purchase price and you want to put 20% as a down payment, you will need to come up with additional funds to get to 20% of the lower value. For example, if the contract purchase price was $500,000, a 20% down payment would be $100,000 and therefore the mortgage would be for $400,000. However, if the current appraised value comes in at $450,000, a $400,000 mortgage is not enough as the bank will only want to give provide a $360,000 mortgage as that is 80% of the current appraised value. If that has confused anyone, do not worry, you can contact me for more information and a further explanation as I would be happy to help.
The key message here is that starting the process of arranging financing/your mortgage whether for a pre-sale property, existing property, or even a refinance, can never be started too early. Contact us today for the assistance you can benefit from.
Best regards,
Maury | (604) 603-2520 | Maury@MauryLum.com | www.MauryLum.com |
