So you’re thinking about building a home?
We have a solution to fit your needs!
There are several types of new construction financing. Your choice will depend on how you are building your home.
1) Builder/Contractor built home with your money
You’ve entered into an agreement with a registered builder to build your home. The builder receives payments as construction proceeds. You will usually use a Progress Draw Mortgage for this
2) Self-Built Home
You are acting as your own general contractor. You will need a ‘Completion Mortgage or a Progress Draw Mortgage’
3) Builder built home with builder’s money
You will require require funds when the home is 100% complete. While you will be responsible for making an initial deposit and advance to the builder, the rest of the construction financing will be handled by the builder. Mortgages on newly constructed homes, town homes, condominiums are usually ‘completion mortgages’
You have purchased / built your home through a Residential Home Builder and only require funds when the house is 100% complete (sometimes they require a small deposit to start). This is simply a regular mortgage.
Example: A customer submits an offer to purchase their builder. The total cost of the home is $400,000. It will be ready in 12 months. Down payments are due as follows:
- $1,000 With Offer to Purchase
- $19,000 once financing condition is met
- $380,000 Due on closing date 12 months from now
In this scenario the customer will pay for the $20,000 from their resources and will only require a mortgage upon closing. This is a single advance mortgage and is the same as a normal residential mortgage.
Progress Draw Mortgage
A Progress Draw is a type of funding, which is advanced in intervals as the house is being built. There are usually 3 draws at; 35%, 65% and 100% completion. A Land Draw (conventional only) may be required if the customer is also purchasing the land.