As a commercial mortgage broker, we are available to help Canadians with the biggest purchase they’ll make in a lifetime. Some people prefer to live in an existing older home, others want to be in one that’s never be lived in.
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New construction loans fall under three different categories. There is a self-built home, what’s called a takeout where you buy from a builder, or a builder contract arrangement that’s called turnkey.
Draws and Other Commercial Mortgage Broker Advice
The money is allocated in different stages if you want to build yourself. These are called draws. If you need to buy the land to build a new home on, the very first advance comes to help you by a vacant lot.
- The next allotment comes once the excavation and foundations have been completed.
- The third draw comes once the roof is put on in the building is protected from the weather.
- Other money is released once the wiring and plumbing are started, the furnace is installed, the bathroom is finished and doors have been hung in place.
- The fifth draw happens when the home is ready for occupancy with all of the exterior and seasonal work done.
There are some differences between traditional and new construction loans.
- The terms on construction loans are much shorter than traditional mortgages. In fact they can last one year or less in many cases.
- With the traditional mortgage, you get the full amount up front. A construction mortgage allocates the money in stages.
Finally, as a commercial mortgage broker we always alert our clients the down payment on construction loans is higher. That’s because the lender does not have an existing house as collateral. Finally, it’s important to remember that an inspector goes onto the property before each draw is advanced to inspect the work done.
