New Construction Mortgages

New construction mortgages allow borrowers to finance the construction of a new property. Since these types of home loans are based on properties that have not been built yet, there are a number of differences from traditional mortgages.

What is a new construction mortgage?

How a new construction mortgage works depends on whether you're hiring a contractor to build a home, building a home yourself or purchasing a newly constructed home. If you hire a contractor, you need a completion mortgage or progress draw mortgage. Completion mortgages allow you to pay for a home once it is finished while a progress draw mortgage lets you finance construction at specified intervals. These two types of new construction mortgages can be used if you're building your own home as well. Meanwhile, if you're purchasing a newly constructed home, you'll want to finance with a completion mortgage. The costs and interest rates differ for each type of mortgage, so it's important to speak with a mortgage professional to fully understand your financial obligations.

Requirements for new construction mortgages

When applying for a new construction mortgage, you will need more documentation than you would if you were applying for a standard mortgage. Not only will you need detailed proof of employment and income, as well as a qualifying credit history, you will also need a signed contract with the builder, or copies of all quotes on building costs if you're doing construction yourself. You'll need a full appraisal of the property, a copy of the purchase offer for the land the home will be constructed on, or a copy of the title if you already own the land. In addition, you should have plans and house specifications, as well as proof of fire insurance and any other third party warranty information that may be required.

How do I get a new construction mortgage?

Contact CanEquity to speak with a mortgage professional about your plans for either constructing a new home or purchasing a newly constructed home. Based on your finances, as well as your timeframe for the project, these professionals can help you find the right loan to fit your needs. Keep in mind that the minimum loan amount must be $100,000 with a minimum down payment of 5 percent and a maximum amortization period of 25 years. The property must also be located on Canadian soil.