Construction Mortgage

Building a home is a complex process; your mortgage shouldn't be.

Home builders have a preference on the type of construction mortgage they need set up by a mortgage broker.

Construction completion mortgage

This type of builder mortgage ensures that your mortgage’s terms and conditions will not expire while the home is being built.

It is required when a builder constructs a home from start to finish using their own funds. Because the building process can take anywhere from six months to two years, the bank will guarantee a rate for the entire build time. This can be risky for banks because interest rates can rise during this time. To offset the risk, the interest rates that are offered are higher than the typical 120-day rate holds. The good news is that the rate will not go up if rates were to rise.

We review completion mortgages 90 days before the possession date. If rates are lower than the construction completion mortgage rate, and the client still qualifies for the mortgage, I can lower the rate. This added service allows clients to feel confident knowing they will always get the best deal. Your mortgage details are finalized at the very end of the process.

Progress draw mortgage

This mortgage is set up to allow the builder to use the lender’s money during the building process. When the home is approximately 30% complete, the builder will ask for the construction draw mortgage to be partially drawn on.

Most details of the mortgage are finalized when the first draw is taken. The term will be selected, the full down payment will be given to the lawyer and the mortgage amount will be set. The interest rate is locked in (if you choose a fixed rate mortgage term.) When the builder constructs the home further, they will draw on the mortgage a second, third and up to a fourth time.

Before deciding on a brand new home, let us help you understand the special terms and considerations in construction mortgages. We can help you decide which option best suits your particular situation.

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