Self Build using new home warranty exclusion?

[G.Mitchell]

Hi all, I have been reading on here that a few other members are dealing with the new home warranty program.

I know there is an exclusion allowed for owner/self builds however it sounds like none of the banks allow this exclusion.

Has anyone here successfully done a self/owner build without needing to purchase the new home warranty?

Does anyone know of banks here in Alberta that will accept the warranty exclusion?

Any help would be most appreciated.

[dwo]

I just received my exclusion. I am dealing with a very experienced RBC Mortgage Broker. He tells me RBC is ok with the exclusion but I am waiting for the financing approval.

It should be ok because what most people don't understand is that the warranty coverage is NOT insurance. If NHW has to enforce a warranty issue the builder has to pay for the cost to remedy the problem. Many builders have to provide personal guarantees to get warranty coverage. If you are building your own home it doesn't make sense to warranty your own project. If you purchase the warranty it is for the benefit of subsequent purchasers of the home and the warranty provider will look to you to remedy any deficiencies during the warranty period.

[G.Mitchell]

Thanks for your feedback. I didn't have much luck with the local RBC mortgage specialist. I have great credit plus my down payment however they wanted me to have close to $90,000 of my own money to do a total build under $300,000...

I agree with you, we are building our own house to stay in long term permanent, certainly longer than the 10 years covered by parts of the new home warranty.

I got a call back from TD that sounds promising however they aren't certain that once I get the governments exclusion that they'll accept it.

The NHW has certainly made a mess out of the self/owner build process.

[diamond k]

Good luck in getting any bank to accept the exclusion. I have yet to have a customer get a bank to accept the acception. Some of the local guys will say that the bank will make an acception but as soon as it gets the mortgage dept it is rejected.

In case anyone doubts the intent of this legislation it was never intending to protect the consumer. It was driven by big builders to drive out smaller builders. Check out the financial donations from large deveolpers and builders to the PC party shortly before the law was put forward. absolutly disgusting that govt has destroyed the livlhood of smaller caftsmen builders in liu of big companies.

ANHWP admited to me today that they have had some of there best custom builders either retire or move away from constructing homes because they could not justify a $25,000 deposit held for 10years from last home enetered into the program. How is eliminating these " craftsmen" in exchange we get the junk we get from any of the massive companies churning out homes.

Let me ask you would you rather get a home from a craftsman who builds one home at a time or the 20 year old super with no construction experience who is building 30 homes at a time.

Yes I am a builder and this legislation is absolutly the stupidiest thing this goverment has done and that says something with this current regime

[Attilathecanuk]

Originally Posted by diamond k

Good luck in getting any bank to accept the exclusion. I have yet to have a customer get a bank to accept the acception. Some of the local guys will say that the bank will make an acception but as soon as it gets the mortgage dept it is rejected.

In case anyone doubts the intent of this legislation it was never intending to protect the consumer. It was driven by big builders to drive out smaller builders. Check out the financial donations from large deveolpers and builders to the PC party shortly before the law was put forward. absolutly disgusting that govt has destroyed the livlhood of smaller caftsmen builders in liu of big companies.

ANHWP admited to me today that they have had some of there best custom builders either retire or move away from constructing homes because they could not justify a $25,000 deposit held for 10years from last home enetered into the program. How is eliminating these " craftsmen" in exchange we get the junk we get from any of the massive companies churning out homes.

Let me ask you would you rather get a home from a craftsman who builds one home at a time or the 20 year old super with no construction experience who is building 30 homes at a time.

Yes I am a builder and this legislation is absolutly the stupidiest thing this goverment has done and that says something with this current regime

I am a superintendent and having just built my own home(got the permits before legislation took effect) I cannot agree with you more. The whole thing reeks of corruption.

[Wes_G]

Originally Posted by dwo

I just received my exclusion. I am dealing with a very experienced RBC Mortgage Broker. He tells me RBC is ok with the exclusion but I am waiting for the financing approval.

It should be ok because what most people don't understand is that the warranty coverage is NOT insurance. If NHW has to enforce a warranty issue the builder has to pay for the cost to remedy the problem. Many builders have to provide personal guarantees to get warranty coverage. If you are building your own home it doesn't make sense to warranty your own project. If you purchase the warranty it is for the benefit of subsequent purchasers of the home and the warranty provider will look to you to remedy any deficiencies during the warranty period.

So am I correct to assume then that 5 years down the road when you decide to sell you home, it will have no warranty because you didn't buy it? Why would anyone want to buy the house then if there is another in the same price range with warranty?

[dwo]

There is a 10 year warranty period for some items. If you get an exemption and then sell within the warranty period you are required to purchase a warranty for the remainder of the 10 years. None of the warranty providers (there are 4 that i am aware of) have any idea what that may cost as they have not had to deal with it yet. Common sense tells you that it will be cheaper than buying it at the outset, BUT, who knows? If you have encountered any structural issues in the early years it may be very expensive or not even available.

The whole thing is a cluster diddle and yet we have politicians and bureaucrats thinking they have done us all a wonderful service.

Also, i inquired with all 4 providers about the cost for an 'owner build'. The terms were identical at all 4. Just a coincidence, I'm sure.

[G.Mitchell]

I've heard back from two banks and both are willing to allow the exemption.

I'm waiting on a third that I'm told allows it as well.

Once I have more solid information I'll update all of you.

[ESOXangler]

Originally Posted by Attilathecanuk

I am a superintendent and having just built my own home(got the permits before legislation took effect) I cannot agree with you more. The whole thing reeks of corruption.

Pockets were lined without a doubt! It's a pure shame!

[Lukesky]

Hi guys, I know this is an old thread but has anyone had any luck with any banks allowing the exemption? Which ones did you deal with?

Cheers.

[bsmitty27]

I completed my self build before this came Into effect. But I felt with Farm Credit for the Draw mortage, they were amazing to deal with.
Brad

[Palo]

Has anyone had any luck getting a construction mortgage when opting out of the Alberta new home warranty program as an owner builder?

[tchammer]

Just adding my two cents to the opinions posted, and they are spot on. This is not only a farce, it is decimating rural and small town builders. I have the home warranty even though some years we will not build a single house, I carry it as a service to our customers in our area. But the carrying costs are high, especially on the years that we don't use it at all. On top of this it has almost snuffed out the possibility of a young journeyman carpenter from ever starting up his own residential construction business. I can potentially see some merit to this in the cities, but not in the rural areas. Almost without fail when there is a problem in a build in small towns it is usually because the homeowner has found a "deal" to good to pass up. You hire the guy out of the bar and then wonder why he is unreliable, or you hire the crew that rolled into the area last year, and then are gone the next. As well many people in a rural area can general their own home if they want simply because they know and are in communication with the applicable trades all the time. Use to be if someone wanted us to frame, and do the exterior finish on the home no problem. If you want us to general contract the project we are happy to do that as well. Now I can't offer that choice to my customers, I have to force them into having me contract the house.

[TotalInferno]

Sorry to revive an old thread, but was wondering if anyone has any recent experience with financing and a self build (owner builder authorization with warranty exclusion).

Will lenders finance such a scenario? or is purchasing the optional insurance a must?

[Dylan15]

Originally Posted by TotalInferno

Sorry to revive an old thread, but was wondering if anyone has any recent experience with financing and a self build (owner builder authorization with warranty exclusion).

Will lenders finance such a scenario? or is purchasing the optional insurance a must?

I built a house, starting in fall of 2021. I looked into both self build and contractor as far as financing goes. The local Canadian Western bank didn't care about the new home warranty at all for my approval, but this was my 5th mortgage through them, so who knows if it was a familiarity thing. I can't remember if I ended up providing them with warranty documents at all, though I very well could have.

In the end, I ended up finding a local contractor to run the build, and credit me back for the work I did myself (nothing considered structural, owner pulled electrical permit, paint, trimwork, etc). I couldn't justify in my mind committing to staying 10 years in the house, and was unwilling to find out halfway through what the cost would be to purchase the warranty if circumstances drove me to selling. Doesn't answer your question completely, but it's worth calling around to several banks, as well as credit unions. Local credit union said owner build no problem when I called, but took a different route before I put in application.

[Dylan15]

And, while this thread is on top, I believe that the warranty/accreditation is likely affecting the housing market, in whatever miniscule percentage it may be, by disincentivizing small contractors from building 1-2 spec homes a year. In my community, many builders that do mostly commercial aren't willing to put up with program costs in a low volume environment. Even in a community of 10000 people, if 10 potential builders aren't building 15-20 homes a year they would consider doing, the market is "capped" in a way. Heck, I would build a spec home every other year to sell as a side business, if I didn't have to tie up $10000-25000 in equity, plus several thousand a year to maintain the license. It's not like even the volume builders are making $100000 per $400000 house. And you likely have to sit on the house for an extended amount of time resulting in interest, utility payments, realtor fees, etc.

[ghfalls]

I did a self build in 2017 and opted out of the warranty. No issue with financing. I’ve done it a few times, and figured out that if you ask for way more than you need, it works out way better. The bank thinks you can finish the house without the final draw, and then pay the rest of the bills with your final draw. The last two times I did it, I didn’t need any money from the final draw, and that removes a lot of the financial stress of paying bills with money that the bank won’t give you yet.

I can’t sell the house until it is ten years old according to the system. But I’m sure there’s a way.

[Dylan15]

Originally Posted by ghfalls

I did a self build in 2017 and opted out of the warranty. No issue with financing. I’ve done it a few times, and figured out that if you ask for way more than you need, it works out way better. The bank thinks you can finish the house without the final draw, and then pay the rest of the bills with your final draw. The last two times I did it, I didn’t need any money from the final draw, and that removes a lot of the financial stress of paying bills with money that the bank won’t give you yet.

I can’t sell the house until it is ten years old according to the system. But I’m sure there’s a way.

For sure. It is a little harder to figure out the finances now with the recent stress test laws, as approvals are for quite a bit lower of an amount than even 7 years ago, which could be an issue for some. I tried this, but didn't pan out for me when they made me pay for an appraisal that didn't allow for too much of an inflated value.

Warranty providers will sell you warranty for balance, but not sure what that entails. I'm guessing house inspection and probable higher than a standard prorated amount, but haven't heard from anyone dealing with that to say for sure.

[TotalInferno]

Originally Posted by ghfalls

I did a self build in 2017 and opted out of the warranty. No issue with financing. I’ve done it a few times, and figured out that if you ask for way more than you need, it works out way better. The bank thinks you can finish the house without the final draw, and then pay the rest of the bills with your final draw. The last two times I did it, I didn’t need any money from the final draw, and that removes a lot of the financial stress of paying bills with money that the bank won’t give you yet.

I can’t sell the house until it is ten years old according to the system. But I’m sure there’s a way.

Yes, this is a concern, on the New Home Warranty Site, it states you can buy warranty after the fact -- it says there is no guarantee someone will sell it to you, but it might be an option. If you can buy warranty after the fact, then you can use that to sell before the 10 year period?

[Grizzly Adams1]

Originally Posted by Attilathecanuk

I am a superintendent and having just built my own home(got the permits before legislation took effect) I cannot agree with you more. The whole thing reeks of corruption.

Kind of like Home Inspections and realtors.