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Hi there

Here's our scenario: We own a house with a mortgage in Ontario, and own a lot outright in BC. We would like to build a house on this lot and then move there as our primary residence.

Thus far, we are having trouble making the money work. I'm hoping someone can give us some advice.

The big banks and credit unions in both Ontario and BC will not issue construction mortgages if you're not a resident of the province your house is being built in, so that option is out as far as I know from the 12+ institutions I've called. And until the house is built, we can't get a traditional mortgage either. Mortgage brokers are happy to set us up with a private loan at 10-12% for the duration of the build, but there is no way we'll accept that as an option. Likewise, touching our RRSP/TFSA cash is not something we want to do.

Our financial picture:

Our home build will be approx $1,350,000 excluding the lot
Our current home equity is about $700k, mortgage about $650k at HSBC
The lot was paid in full with cash, $300k
Current RRSP/TFSA about $1M
Combined yearly salary $300k
Zero debt or liabilities otherwise. Cars/boat/credit cards etc. paid for.
We have a $300k HELOC which we could access

Looking at our finances, I can't comprehend how we can't make this build happen, yet no one I've talked to "bankers" seems to be able to know how to make the cash flow work across the provinces while keeping interest rates kind of reasonable.

Thoughts?

Mat
 

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Big dreams, and willing to tie a whole pile of future earnings up in real estate.
50K in house equity, and you wan to bite off a whole huge more.

The lot in BC is all paid up, and presumably minimal carrying costs.
Keep the jobs in Ontario, and buckle down and save.

Figure what the house will need in services.
If it is rural that means:
a gravel drive way,
power connections,
a well,
and a septic system at the least.

Pay for these from your Ontario jobs savings to put these in.
They will be cost recovered in 95% of the cases if you have to sell the lot before a house can be built on it.
Then save up at least a year of core living expenses in your bank account. Forget the LOC for now.

Once these are all paid for then you will be in a position to get a builders loan.

Get at least one full time job lined up in BC.

Buy a modest camper trailer to live on site in for a year

Sell the Ontario house.
Living on site you stand a whole lot better chance not getting ripped off by a builder, and you can generally oversee construction.

Might not be the move to BC in six months answer you sort of hint at, but a whole lot more prudent approach, in my opinion.
 

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50k in equity or $700k in equity? Is your current home worth approx $1.3M?

what’s your income? Are you working in Ont? Plan to work in BC? New job? Same job?

who’s building the mortgage in BC? Would they lend to you?
 

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You should be able to get a HELOC on the lot if it is fully paid for. Usually 65% LTV for bare, serviced lots. If its not serviced you're out of luck. If it is, then that's 200K you could take out. Then with your 300K HELOC, that's 500K to start house construction. Get the private lender mortgage lined up and draw on that only when you run out of your 500K. Then move, close it out and get a proper mortgage. If you do it right and your build doesn't go south, you might only need the private lender for 4 or 5 months.

Obviously if house prices go south in either location (especially ON), this plan could backfire.
 

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I can't help but wonder if the new build is huge. It seems strange to that the new build, with the lot already paid for, costs the same as the old principal residence.

How quickly is the move to BC planned for?
After moving, is the plan to still be working?
Is the build planned to be done asap?

I have a friend who paid for his lot in 2000, cleared land for about seven years while getting the house build planned out. IIRC, the build itself to have a shell was about two years and the furnishings/appliances/finishing touches were done over the next four years.


Cheers
 

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It seems to be a risky proposition to be financing anything in the next year or so while BoC wrestles with interest rate increases to tame inflation. It is quite possible housing is ripe for a significant pullback/reset and I sure wouldn't want to be carrying substantial debt during that reset.
 
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