We have looked at building one's own house over the last couple of

weeks. This writer has suggested that "off-site security" is by

far a better way to build. Off-site security means using someone

else's house equity so you can build your own home with cash. You

avoid the Construction Lien Act, and can build faster and cheaper

because you have the cash. Some years ago I ran a little anecdote

that some people found helpful when visiting parents to ask them

for the use of their home during construction. I hope it can work

for you as well. Good Luck!

Bob showed up at the door today, with his wife & son in tow. Since Christmas had gone by, and my birthday is in July, I knew he wanted something. "What's on your mind, Son?" "Well Dad, Janet (wife) & I want to build our own house this summer. Could we discuss our plans with you?" In they came and when the tea was ready, we all huddled around the dining room table.

Bob pulled out a calculator, a pad of paper, all kinds of figures, plans, an appraisal, pens, list of building materials, and labour quotes. I knew I was in it for the long haul.

"Dad, here are comparative lists of building materials and labour quotes. You will notice that the side entitled "construction loan" is 15% higher than the side entitled "cash" ($115K vs $135K)". I could feel the noose tighten around my pocket book! He continued "I have a mortgage commitment from ABC Bank for $115,000 with only one condition, that the new house be 100% complete. I have an appraisal that the Bank ordered showing a completed value of $154K, as long as I follow the plans. I need to borrow YOUR HOUSE'S

EQUITY for four months. Allow me to put a mortgage on your house (valued at $160K) for $115,000. The Bank will qualify the loan based on my family income. You will of course have to sign because it's your house. Once my house is built (four months) I will put a mortgage on it to payoff the lien on your house. This will save me 15% in costs, plus I won't have to pay the CMHC high ratio insurance fee of $3300. While my house is under construction, we will give you a mortgage on our new lot as added security. What do you think?"

He had done his homework, every detail had been covered. My pride in his foresight dictated a positive answer. My lawyer advised me that indeed if anything went wrong, I could take over the construction site, finish the job and sell the new house for a profit.

I agreed to lend him my property equity for four months, he would pay for an appraisal on my house (required), the legal fees to prepare the "open" mortgage on my house, and the transportation to get me and the wife to the lawyer's office to sign. It didn't cost me a penny, it saved him a whole lot of money and all the while I had the added security of having a mortgage on his new property.