Financing & What happens if it goes wrong

First of all, before you go house hunting, go to your bank, trust company, or other financial institutions and see what mortgage amount you can qualify for.

Take your significant other, if you have one, because everyone’s income and assets help.

Once you know how much you can get, get the best rate you can and get it locked in for as long a time period as possible.

Do not be afraid to negotiate- the banks want and need your business. And do not be afraid to shop rates and lockup periods.

Get your commitment in writing!

Remember, time is important because of the time it takes to have your house ready, and remember to allow for extensions or construction delays.

Now, we are ready for the builder. Go to the sales office armed with your knowledge, and look to see what mortgage rate and term the builder is offering.

Take note, the builder may have brought the rate down to make his package more attractive, or may have persuaded his bank as part of his deal with them to offer special packages.

Remember, if your banks offered rate and terms are close, you may be able to negotiate a better deal with the builder. If you don’t take the builder mortgage, you may be able to get some leverage in your overall negotiations, as the builder may save money by not having to pay his bank for the better rate. Question this and make sure you understand all of the financing details.

When we walk into that sales office all ready to buy our beautiful new home, perhaps the most important piece of the puzzle is security in our financial arrangements.

A tragedy waiting to happen occurs when you sign an unconditional offer, give your hard earned and saved deposit to the builder, and later find out you do not qualify for the mortgage.

In other words, don’t buy the house unless you have a mortgage commitment or a conditional deal! This leads us into the next part of today’s discussion- what happens if it goes wrong?

An Agreement of Purchase and Sale for the purchase of land is a contract, and, once it is unconditional, binds both of the parties to do the things that they are obligated to under that contract.

If either party does not perform their part of the bargain, they can be held liable to the other party for either specific performance or damages.

Firstly, if the purchasers default, they will likely lose their deposit. The builder will then option of suing to force them to close the deal and pay all legal fees related thereto (specific performance), or sue them for any damages the builder might suffer before he resells the house (things like interest, changes, price differential, etc.) and legal fees.

Sometimes in a booming market, kindhearted builders will release purchasers who have made a mistake or encountered personal tragedies, but don’t count on it!

The moral of the story is make sure you have financing, or that the offer is conditional for a few days pending both financing and review by a lawyer. It is critical that you get the right advise: that is the law. When you select a lawyer, find one who cares about you and a long-term relationship.

Good luck and happy house hunting.

Always be an informed client.

For more information contact your Toronto Mortgage Broker at 416-920-9931