Construction & Progress Advance

Pros and Cons of building your own home

Before you can build your home, you will need to design it. That's where an architect comes in.

Experienced architects will ask what you want and need in your new house:

• Number of rooms
• Floor layout
• Storage needs
• Ceiling heights
• Architectural style
• Etc.

The very best architects will take human factors into account as well. For instance, if you have young children now, your architect should plan a house that'll still be comfortable when they're older. And, of course, the house your architect plans should be one you can afford to build. Once you've finalized your home plans, be sure to obtain enough copies for your municipality (for building permits), your general contractor (if you're using one), your bank and the sub-trades you will use. Ask your architect how many copies you'll need. When your blueprints are completed, you can start planning how you'll pay for your new house. If you don't have the funds to finance the project entirely yourself, you'll need to arrange a construction mortgage.

Construction Financing.

• Most lenders will lend on only residential, single family dwelling for use as the applicant Principal residence or owner occupied recreational property.
• Construction mortgages are available for applicants who are there own general contractor as well those who choose to use a builder.
• 90 day interest rate guarantee on completion or application date
• Full appraisal for loans and occupancy permits on completion.
• Lending limits (guideline only) 80% of $1 000 000 and 60% of the balance or 80% finished appraised value or 80% land value plus 80% of hard costs *

      *hard costs as defined construction costs i.e. materials, labor, net GST

• During construction advanced funds float at prime + 2%
• Applicants will have administration fees such as application fees (1.5% of mortgage request- 50% is refunded at final conversion to 3 year or longer mortgage product)

                  Draw fees of $450 per advance of funds usually construction loans have 3-5 draws over 12 months.

                  Solicitor will execute title searches to ensure no outstanding constructions liens exist.

                  Example Timing of Draws: 1. Value up to 65% of serviced lot

                                                         2. Lock up (house framed with roof, walls, doors and windows in place)

                                                         3. Completion

                  or if no land draw is required

                                                     1. On completion of foundation including back fill

                                                     2. Lock up (house framed with roof, walls, doors and windows in place)

                                                     3. Interior completion

                                                     4. Completion                                              

• All building permits and plans must be on hand prior to first draw.

         Applicants should demonstrate liquidity to handle start up costs and increase in building costs. i.e. 10%-15% from own resources.

The Phases of Construction

Most homebuyers have a lot of questions about the construction of their home:

• How long will it take to build?
• What happens when?
• What does each step involve?
• When can we visit the site and see our home in progress?
• When do we have to make final decisions about cabinets, fixtures, flooring and so on?
• When do building inspections take place? Will we have a chance to inspect it ourselves before we take possession?

Below is an outline of the typical construction process today. Keep in mind that this is a generalized description-your own new home builder may use a different approach. The process and schedule will also be affected by the size and style of the house; the lot; the construction techniques used; the amount of customization required; the number of municipal inspections; whether the home is located in a large development; availability of labor, and many other factors. Ask your builder to explain the process for your home.

Phase One: Pre-construction
Before any construction begins, plans for your home are developed, finalized and submitted to the municipal building permit office for review. Permits may be required for all or some of the following work: building, electrical, plumbing, septic system and sewer connection. Prior to this, a number of site tests may be conducted to examine the water table, the soil and the bearing capacity of the ground and to conduct environmental tests. With this information, final engineering adjustments can be made to the plans.

Phase Two: Foundation
Your house is staked out and the land is prepared. Often, the topsoil is removed and piled elsewhere for later use. Excavation is done, and the footings (concrete slabs to support the foundation walls) are formed and poured. Water, electricity, telephone and cable services may be brought in at this time. The foundation walls are erected (may use poured concrete in temporary wooden forms or permanent insulated blocks, concrete blocks or preserved wood, for instance). The foundation may be insulated and damp-proofed. Weeping tiles are installed to drain ground moisture away from the house. A municipal inspection of the foundation may be conducted before the outside perimeter is backfilled. At this time, the builder may ask you to begin making your selections-deciding on flooring, tiles, cabinets and so on. While it will be weeks before these items are installed, they must be ordered early to prevent delays later.

Phase Three: Framing
Exterior walls, interior partitions and the roof are assembled. This usually means erecting a framing skeleton and applying an exterior sheeting, or another framing technique may be used. Frames are built on the floor, one wall at a time and then lifted in place. Roof trusses are most often brought to the site ready for installation, and roofing is completed as quickly as possible, to prevent accidental damage as work progresses on the lower parts of the home. Windows and doors are installed. The builder's aim is to get to "lock-up" as quickly as possible to protect the structure from the elements.

The basement floor is installed. Electrical and plumbing services are roughed in, and ducting for heating, cooling and ventilation is put in place. At this time, your municipality will probably require a structural inspection to ensure that the home is being built according to building code requirements. Electrical and plumbing inspections will likely be conducted as well.

Phase Four: Interior and exterior work
For the next several weeks, a great deal of work will happen inside and out, much of it at the same time, or overlapping. Proper scheduling is key to smooth progress. The exterior walls and the roof are insulated, and a vapor barrier is applied. Another inspection may take place to ensure this work has been done properly, before the drywall is installed. Heating and cooling systems are installed, including fireplaces. Walls and ceilings are painted, flooring is laid, and kitchen and bathroom cabinets are installed. Plumbing and electrical fixtures are put in, trim is applied, and interior doors are hung. Siding is applied on the outside, along with eaves troughs, and porches and decks are installed. Final lot grading is done, and the driveway and walkways are put in.

Several additional municipal inspections may occur. For instance, after completion of the interior to check stairs, handrails and other health and safety related items, and/or after final grading outside. Plumbing and electrical work will probably require final inspection. During this period, your builder will stay in regular contact with you, to update you on progress and to meet deadlines for selecting finishes and other decisions you may need to make.

Phase Five: From near-completion to hand-over
At this point, your builder and crew are busy completing the final touches and cleaning up. You will be asked to do a walk-through of your home with the builder. Any last-minute touch-ups will be done. On the date of possession, you will be handed the keys-the home is now yours.

You'll have opportunities to save money throughout construction. As your home goes up, ask your contractor and subcontractors if there are ways you can keep your costs down

Hiring a General Contractor

A general contractor will coordinate the entire process of constructing your new home, ensuring your house is constructed well, on time and within budget. You're not required to hire one, but when you consider all that a general contractor does, you'll probably agree it's money well spent to build your dream home the right way.

Your general contractor will:      

• Obtain the proper building permits and arrange for the proper inspections to ensure that your house is built to code.
• Coordinate subcontractors and suppliers, scheduling them so that construction can occur as efficiently as possible.
• Supervise subcontractors, ensuring they complete all the work they are contracted to do, properly and on time. The contractor will also handle any disputes or conflicts that may arise on the site.
• Complete the necessary paperwork, track costs, informs you when draws will be required, gather warranty records and manage all the paperwork.
• Communicate progress, answer your questions and advise you of when you must make decisions on components such as lights, flooring and cabinetry. The contractor will also work with you to minimize costs where possible.
• Check out your contractor's qualifications.

Above all, make sure the general contractor you hire is licensed. He or she should be experienced and understand the home construction process in detail. When interviewing contractors, ask for references, and view homes they've built.    

Managing Your Home Construction

Building your own home is financially more complex than purchasing an existing home. You'll have to track your construction costs across four different categories:

• Fixed costs. Any cost that will not change, including architectural fees, building permits and the cost of the lot itself, for example.
• Bids. Subcontractors (carpenters, plumbers, electricians, etc.) will review your house plans and specifications and submit bids for the work. Ideally, you should get three bids for each sub-trade. You may choose subcontractors based on the lowest bid, but other factors like quality of past work or references should influence your decision.
• Estimates. Within each subcontractor's bid will be cost estimates for materials and labor. In some cases, you may see estimated material quantities without estimated costs because the final cost cannot be determined until the work is done. For example, you may get an estimate as to how many loads of dirt is required to backfill the foundation, however, the final cost won't be determined until the last truck load of dirt has been unloaded.
• Allowances. In the finishing stages, you will "allow" certain amounts of money for specific purposes such as lighting, cabinets and flooring. You can spend your allowances any way you wish, as long as you don't exceed them. You may make some trade-offs, as well. For example, you may choose to spend less on bedroom carpeting so you'll have more to spend on kitchen floor tile without exceeding your total flooring allowance. You'll need to work with your subcontractors and insist on accurate forecasting in order to stay within your budget. If you go over-budget, you'll have to pay the extra costs. It is vital to have a reserve in place, such as a Credit Line to handle additional costs and changes.

Links:

• http://www.cmhc-schl.gc.ca/en/co/co_001.cfm
• Equilibrium Housing 
• See Equilibrium's Brochure (PDF)
• Click here to read CMHC's article on Progress Advance.