Why RBC’s Preferred Builder Program for Presell Units Provides Peace of Mind
RBC has provided a very notable program for clients who are purchasing pre-build condominiums, including our Triple Crown Community project. It is called the RBC’s Preferred Builder Program – in essence a long-term financing package for presell units.
With more than 25 per cent of sales is coming from new construction, it is a market RBC has been serving well for over a decade, though few are aware of the program or how it works.
The package offers long-term financing packages for presales. And if you’re considering a pre-build condominium purchase, this program offers key advantages and protections.
First, RBC will approve you up-front with no conditions.
What does this mean?
It means you will not be asked to reapply with the approach of the closing date. You don’t have to requalify 30 days before approval. You’re insulated and protected from banking changes, government regulations, or changes in your own life situation; you are approved based on your situation right now.
RBC Knows Life Happens
Your application approval is based on what is happening now. If 30 days before closing, you end up losing your job or you become disabled, or you break up with your spouse, you don’t have to worry. You could have purchased an F150 along with a $500 per month payment towards the truck. It doesn’t matter. You’ve already been approved.
RBC also offers long-term close rates that are protected until the completion of the unit. They give a slightly discounted rate based on today’s rates, and they will honour it for two to three years out. They will hold the rate. And, 120 days before the closing date, if rates are better, if rates have gone down, they will provide the better rate, without having to requalify you.
That’s real peace of mind.
Another important fact about the Preferred Builder Program is the appraisal. RBC often appoints an appraiser to a building who will evaluate all the units and get to know the building inside and out to ensure accurate pricing in the current market.
What happens if the market changes?
Fast forward two years from now, if the market actually dips down a bit, you do not have to worry about making up the difference between the purchase price that they paid and potentially the new appraisal that is lower.
Most banks lend based on whatever is lower; the actual purchase price or the appraised value. If you are not dealing with the Royal Bank’s special financing package where the evaluation is completed in advance, and the prebuild is reappraised two years later and it’s lower, 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.
But how does RBC appraise a property that hasn’t been built yet?
Their assigned appraiser visits the location, looks at surrounding amenities, look at plans for the current units (all which have risen in value), talks to the builder and discuss the quality of finishing to find out if they are building in quartz counter tops, hardwood floors, high end appliances (hint: we are) and comes up with an up-front value.
Yes, but do I pay a higher interest rate?
RBC’s interest rate on a four-year fixed, to hold it for two years, is higher than today’s rate. However, the Bank of Canada is extremely interested in raising rates. In two years, if the four-year rate climbs higher than RBC’s four-year fixed rate, you will be thanking your lucky stars that you locked in. Conversely, if in two years, the four-year fixed rate is lower at 120 days before closing, RBC will offer you the lower rate and reset the commitment start date.
RBC’s Preferred Builder Program is a Win/Win.
Why isn’t everyone using this pre-build package? Because not a lot of people know about it. Do your research and consider locking in with this program. You will certainly sleep better for the two years that it takes to build!
Another benefit: RBC offers free mortgage insurance. For example, if a couple are purchasing a unit together, we can offer free life and disability insurance. If one person passes away, and even if the condominium has not been built to completion and has not been funded, the survivor will have a free and clear home. It costs $0 for the duration of the build, and there are zero payments. Mortgage insurance is free and can be cancelled at any time. (But why would you?)
You can also include critical illness, if you are diagnosed with one of the big three: heart attack, stroke, or cancer. If diagnosed, you receive a $300,000 lump sum towards your mortgage. That’s just a diagnosis, you don’t have to be terminal to receive the payout. And this insurance is also… you guessed it…Free.
RBC really takes care of their client and provides real peace of mind in presale.
We do not receive any benefit from sharing this information with you, except that we can help our clients make more informed financial decisions.
To your health and wealth!
Todd Mahovlich and Justine Connor