RBC’s Preferred Builder Program
Why RBC’s Preferred Builder Program for Presell Units Provides Peace of Mind.
Interview with Tony Preziuso – RBC Mobile Mortage Specialist
Many of Tony Prezuiso‘s mortgage clients are purchasing pre-build condominiums, including Triple Crown’s projects to whom he provides the RBC Preferred Builder Program – a long-term financing package for presell units.
“With 25 per cent of sales is coming from new construction, it’s a market RBC is very interested in serving, and they have been serving it well for over a decade,” says Tony.
If you’re considering a pre-build condominium purchase, RBC’s Preferred Builder Program is well worth considering because it offers key advantages and protections, the first of which is RBC will approve you up-front with no conditions.
What does up-front approval with no conditions mean for a mortgage?
It means you will not be asked to reapply with the approach of the closing date. You will be insulated and protected from banking changes, government regulations, or disruptions in your own life situation. Essentially, you are approved based on your current, not future, financial situation. That can provide a lot of peace of mind knowing if something happens 30 days before closing, you don’t have to worry.
“People change jobs, lose job tenure, or spouses break up,” says Tony. “Maybe you purchased an F150 along with a $500 per month payment towards the truck. It doesn’t matter. You’ve already been approved.”
What happens if the market changes?
Most mortgage programs banks offer lend on whatever is lower; the actual purchase price or the appraised value. If you’re not dealing with the Royal Bank’s special financing package where the evaluation is completed up front, and when prebuild is reappraised two years later and it’s lower, with other banks, the client has to make up the difference between the purchase price and the actual appraisal, and that will be above and beyond the actual down payment they planned on putting down.
“Fast forward two years from now and say the market has dipped down a bit, our clients don’t have to worry about making up the difference between the purchase price that they paid and the new appraisal that is potentially lower,” says Tony.
How does RBC appraise a property that hasn’t been built yet?
The RBC Preferred Builder Program has a unique appraisal process. RBC usually appoints appraisers to specific building who will evaluate and get to know the building inside and out to ensure accurate pricing in the current market. The appraiser visits the location, looks at surrounding amenities, look at plans for the actual units, talks to the builder and discuss the quality of finishing to find out if they will be putting in quartz counter tops, hardwood floors, etc., and comes up with an up-front value for the mortgage.
Do I pay a higher interest rate in the Preferred Builder Program?
The program offers long-term close rates that are protected until the completion of the unit. They provide a slightly discounted rate based on today’s rates which they will honour on closing date one, two or even three years out. We’ll hold the rate. At 120 days before the closing date, if rates are better, if they have gone down, they will provide the better rate without requalifying you.
The current rate on a four-year fixed and held for two years is at 4. 89 per cent.
“When someone hears that, they will say, ‘now wait a minute, that sounds pretty high compared to today’s rate,’” says Tony. “And yes, it is a little bit higher. But remember, that’s the worst-case scenario. In two years time, if the four-year rate climbs to 6.5 per cent, you’ll be thanking your lucky stars that you locked in at 4. 89 per cent. Conversely, if in two years time, at 120 days before closing, the four-year fixed rate is 3.25 per cent, we’ll offer you the lower rate and reset the commitment start date, so your rate will be 3.25 per cent,” says Tony. “It’s win/win.”
Free Mortgage Insurance.
RBC’ Preferred Builders Program also offers free life and disability insurance. That means, if a couple who purchasing a unit together experience an unfortunate incident where one person dies, the surviving person will inherit a free and clear home even though it hasn’t been built to completion and hasn’t funded. It costs zero dollars for the duration of the build, and you make no payments.
If you decide you don’t need the insurance at the time of completion, you are free to cancel it. But it’s good to know you are covered while waiting for your new condominium to be completed.
Insurance can also include critical illness. If accepted and you are diagnosed with one of the big three: heart attack, stroke or cancer, it will provide a $300,000 lump sum towards your mortgage.
“That’s just for a diagnosis, you don’t have to be terminal to receive the payout,” says Tony. And the cost of this insurance? Also, free.
Why isn’t everyone using this pre-build package?
The RBC Preferred Builder Program has a lot of advantages for their clients that go a long way to provide peace of mind in presale, but it isn’t well known. No matter how excellent a program, Canadian banks must be circumspect in how they advertise. Regardless, this program is terrific because it allows you lock in at a decent interest rate and sleep soundly for the two years that it takes to build your new home.
“If you’re thinking about buying a presale, talk to me,” says Tony. “I’ll walk you through every step of the way. No other broker can offer anything remotely close to this. You need help, I’m your guy.”