Frequently Asked Questions

What is the "Buyer's Advantage Solution":

The "Buyer's Advantage Solution" provides flexible financing of up to 100% of the costs of building and buying your new home, including the down payment, options, closing costs and interest payments. The "Buyer's Advantage Solution" increases your purchasing power with an aggressive qualification process and is designed to maximize your tax advantages.

How does borrowing 100% benefit me?

Most builders require deposits from buyers prior to the commencement of construction. These deposit requirements typically consist of some percentage of the sales price ranging from 5% to 10%. In addition, most builders require a percentage of the cost for options that can range from 25% to 100%. Most of today’s homebuyers typically have their wealth tied up in their current home, or has to pay into their own retirement, or have invested most of their funds into the stock market; in hopes of achieving the best gain. Because of the traditional requirements of down payments, in order for a buyer to purchase a new home, they may have to incur large penalties to get to their own funds. The best way to purchase a new home without incurring an unnecessary penalty is to purchase your new home with K Bank's Buyer's Advantage Solution.

What does the Aggressive qualification process do for me?

Due to the fact that K Bank allows the buyer to finance up to 100% of the costs of building and buying their new home, the funds that would typically be tied up in down payment requirements are now available to you. As you may be aware the interest you pay on your home is the only consumer loan product that remains tax deductible to you, so instead of putting up a large down payment on your new home, take the funds you would have given the builder and payoff your consumer debt, invest the funds or make your new home all you ever wanted. If you are going to carry debt, allow it to be tax deductible debt! Typically, $100,000 down on a mortgage lowers your monthly mortgage payment by $599.55 (payment calculation based on $100,000 loan amount at a 6% interest rate calculated over a 30 year period. Terms, conditions and interest rates may vary). On average, if you were to payoff $30,000 in consumer debt, you would eliminate $400-$500 in monthly outlay (all information published by lender should not be relied upon as a substitute for independent research).

How do I get possible tax advantages?

One of the benefits of the "Buyer's Advantage Solution" is you become the legal owner of the property, on which your home will be built, before construction begins. As long as the new home is going to be your primary residence within a two year period, the interest payments that are paid during the construction period are tax deductible to the legal owner of the home, and may be tax deductible to you, even if financed in your loan (please see your tax accountant about the deductibility of any mortgage interest).

Do I have to sell my current home upfront?

If you currently own a home, it can become a burden when it comes time to buy your new home. Why? Because most home builders will not accept a contingent contract (a clause in a contract that states, "if your current home does not sell you are not required to purchase the new home and you will not incur a penalty) from a homebuyer. Most new homebuyers rush to sell their current home in order to purchase the new home; and in some cases because of the need for a rush sale, may loose profit. If you sell your home prior to being prepared to move into your new home you may be required to obtain short term uncomfortable living arrangements. With the Buyer's Advantage Solution, you are allowed to sign a non-contingent contract and you have the entire building period to sell your current home. If timed right, you may not need to move twice! In addition, K Bank offers a free bridge loan against your current home, if it does not sell during the building period.

Are there any extra fees associated with the Buyer's Advantage Solution?

Typically, a lender wants a down payment from a homebuyer so the homebuyer is vested in the project. If you do not put up a down payment, to offset the perceived risk, a lender may increase your interest rate or attach mortgage insurance, which can be quite costly over the life of your loan. With the Buyer's Advantage Solution your interest rate will be exactly what everyone else pays that match your particular qualifications and typically the Buyer's Advantage Solution does not require Mortgage Insurance. You may be asking what the catch is. The offset of risk for the Buyer's Advantage program is points charged based on the calculated risk assessment of your particular loan. We charge points because they can be tax deductible and may be financed in the loan. Since there has to be an offset of risk K Bank tries to do it in a way that can be offset by a tax advantage (please see your tax accountant about the deductibility of any points).

Is there anything additional I have to do for the Buyer's Advantage Program?

When the construction loan settles K Bank allows you to finance 100% of the loan with a pledge instead of the traditional down payment requirements. A pledge is defined as a promissory note that allows K Bank to offset any loss that may be incurred if K Bank is required to sell the property at a loss. The pledge requirement is a percentage of the loan (determined by the overall qualifications of the borrower and the size of the loan) and can be met one of the following three ways:

·      A CD/Savings account in K Bank

·      Pledged against an investment account of your choosing as long as your financial institution will allow you to pledge assets, or;

·      Equity in a current home/property.

This allows you to purchase your new home without the need to put up any deposit funds. In addition, if you so choose to reduce your loan amount, you may now do it at the completion of your new home, which will hopefully alleviate some of the penalties that the typical down payment at commencement requirements would cause. Hopefully, when your new home is ready for you to occupy, you will have sold your current home or your investment account has had time to recover.

Who borrows - whose risk?

The loan is given to the home buyer. The risk that is spoken of is; what is at stake for loss during the building of your new home? One form of risk could be the buyer puts up a deposit on land/construction without the benefit of ownership. Traditionally, the buyer puts up a nonrefundable earnest money deposit and then purchases the new home once the home is completed. With this option, if the builder has financial set backs during the build out process, the home could be caught in any financial proceedings, which could cause a delay and ultimately the deposit and/or the home might be lost during said procedures. With K Bank's Buyer's Advantage Solution, the buyer is able to finance 100% of the transaction, thus not putting out any funds that could be subject to loss. K Bank pays for work completed in the arrears (so, hopefully, if anything goes wrong during completion of the project there should be enough left in the escrow account to allow another builder to complete the work). In addition, if the builder is forced to go away during the building period, the buyer owns the land and has the option to bring in, upon approval, to complete the home or after all required proceedings; you may be able to sell the asset. There may be additional carry cost during any delay, which K Bank may be able to finance for you.

What are the interest payments based on and who pays them?

The interest payments during the build out process are calculated based on the funds that are drawn out. The borrower is ultimately responsible for the interest payments due during the build out. In some cases, your builder may agree to pay some or all of the interest due during the building period (please see your sales contract for terms and conditions of any incentives given by your builder). If your builder is not paying interest and the value of your new home allows K Bank may allow you to finance the interest payments in your loan.