Question:

We are looking at building our own house but are unclear on what the banks and CMHC require. It would appear that if we go through CMHC we will require 10% down and must use a new home warranty approved builder. Or if we want to do it on our own, i.e. be our own general contractor, then we need 25% down. We have noticed that CMHC does indicate that a Homeowner builder does not require the new home warranty. Does this mean that we can go through CMHC, 10 % down and still be our own homebuilder? Any information you can provide would be much assistance, thanks.

Answer:

It is possible to build your own home and have a high ratio mortgage. This is ususally done in two stages, first a construction mortgage and when the property is built a completion mortgage to pay out the construction mortgage. For the most part, you need $30-50,000 ready cash available to make it work.
Lenders are reluctant to provide construction financing to private individuals building homes for various reasons. These include, failure to cost the house construction properly (cost everruns), the length of time it normally takes a private individual to complete a home on evenings and weekends, possible problems associated with a non-contractor built home and lack of Ontario New Home Warranty coverage to protect their security should there be a major problem with the home.

Answered By: John Lozinski

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