Navigating the Presale Home Financing Landscape | Fifth Avenue REM mediaiqdigital tracking pixel
Home Buying, Real Estate News, Your Next Home | December 13, 2023

In the aftermath of the Bank of Canada’s recent announcement maintaining the key interest rate at 5% in December,  the journey toward purchasing a presale home has gained renewed significance.

Understanding the intricacies of financing is crucial, and thoughtful consideration is key to ensuring a smooth experience. Here, we explore essential aspects of presale home financing, with a focus on your needs and peace of mind.

What to Consider for Financing in a Presale Purchase? 

 When considering financing for your presale purchase, several factors can make the process smoother:

  • Early Approval: Seek preliminary approval to avoid last-minute surprises. RBC reviews credit bureau, income, and employment upfront, eliminating the need for a second review at completion.
  • Interest Rate Protection: Explore options for capped interest rates during the construction period. You may be entitled to a reduced interest rate if rates decrease before your closing date. Note: the rate is determined on the date you inquire within 120 days of closing.
  • Cost Considerations: Look for favourable terms, including no processing and appraisal fees.
  • Incentives: Some financing options offer cash back, providing a welcomed financial boost. RBC may provide up to $3000 cash back on an eligible mortgage (subject to change). There are optional life, disability and critical illness insurance coverages at no additional cost during construction.
  • Advance Property Appraisals: Completed at the time of application, locking in your purchase price.

How Do Interest Rates Vary for Presale Purchases Beyond 120 Days?

Interest rates are dynamic and can fluctuate. To secure the most competitive rates tailored to your home’s construction timeline, connect with a mortgage professional early on. They can guide you on rate considerations based on your unique situation.

How Can I Overcome Qualification Challenges?

If qualification poses a challenge at current rates, consider:

  • Alternate Financing Programs: Explore tailored programs for clients with unique financial profiles. At RBC, their Alternate Mortgage Solutions (AMS) Program is an extension of a Home Equity Financing Solution. The AMS partners are a group of professionals within RBC committed to helping clients who don’t currently meet standard lending criteria.
  • Financial Guidance: Work with financial advisors to strategize down payments, savings, and debt management.

Navigating Unconventional Income or Non-Resident Status?

Financial landscapes vary, and accommodating diverse needs is essential:

  • Self-Employed Individuals: Explore options for conventional or insured mortgages with reasonable stated income.
  • Investors: Leverage up to 80% of the appraised economic rent for debt servicing considerations.
  • Non-Residents: Tailored solutions based on loan-to-value ratios for different circumstances. For example, up to 80% loan-to-value for U.S. non-resident borrowers applies, and up to 65% for other non-resident borrowers.
  • New Canadians: Tailored solutions based on loan-to-value ratios of your purchase for different circumstances apply for individuals who have been establishing or re-establishing their lives in Canada for less than five years.
  • Wealth Accumulators: Craft personalized strategies for wealth-building.

In conclusion, the presale home financing journey is nuanced, requiring careful consideration. By approaching this process with mindfulness and early engagement, you can navigate the landscape more comfortably.

When is the Best Time to Consult with a Mortgage Professional for a Presale Home Purchase?

Consider reaching out to a mortgage professional as soon as you decide on a presale home. Early engagement allows for a comprehensive exploration of options, helping you navigate the financial landscape with confidence and clarity.

For a thoughtful consultation tailored to your needs, feel free to reach out to our RBC Mortgage Specialists:

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