New Construction Draw Mortgages
Builder's mortgages are available to home owners who are building a new home. It can also be called a progress draw. This program allows residential home builders and individual home buyers to take advantage of insured progress advances while the property is being built.
We will walk you through the entire process from start to finish. We are here to make sure you get the best rate and product possible for your new home.
Three Programs
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Residential Home Builder program: for people who are buying a home through a residential home builder.
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Contractor program: for people who either own their own land or buy the land from a general contractor, and then build their home through that one general contractor (more than 50% of the cost to complete is done by one contractor)
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Self-Built Program: for people who either own their own land or purchases the land and acts as their own general contractor and hires qualified, licensed trade persons to build their home.
Acceptable Loan Purpose
Loan-to-Value Ratio Limit
Eligible Properties
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Maximum two units. Single-family detached and semi-detached homes. Condominium properties are not eligible.
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New construction must conform to the National Building Code and the latest edition of Residential Standards Canada - or the applicable municipal and provincial building codes.
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Pre-fabricated homes are eligible for full coverage. Approved pre-fabricated manufacturers are admissible for specific disbursement methods and are eligible to receive a full advance with no holdbacks and may receive payment on delivery of the module(s).
Residential Home Builder Program and Contractor Program Qualification
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Builder/contractor must meet general profitability and credit worthiness as per lender's guidelines.
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Builder/contractor must be a member of the New Home Warranty Program (NHWP)
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Each unit must be registered with an approved NHWP
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Builders/contractors must be approved by insurer to benefit from full coverage on all insured progress advances
Borrower Qualification
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Regular requirements related to income, down payment and credit worthiness apply
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We allow gifted down payments from immediate family members; provided they are properly verified, non-repayable and all other characteristics of the borrower are acceptable.
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Government grants may be considered if program is approved.
Borrower Documentation Requirements
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Residential Home Builder program: all schedules and plans
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Contractor program: all plans and specifications approved by the municipality and a copy of the contract with contractor(s)
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Self-Built program: all plans and specifications approved by the municipality, estimates and/or contracts for all aspects of the construction
With loan submission:
During construction:
Inspection Requirements
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Lender is fully authorized to make interim and final advances in accordance with their institution's internal practices on progress draw mortgages. Advances must not be made for land only.
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Lender is responsible for confirming the market value of the home.
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Insurer will pay for up to 4 progress advance inspections. If more than 4 advances are required, the customer is responsible for the cost of the additional inspections required.
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The assigned appraiser will inspect the property, determine the percentage to complete.
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Minimum amount for first draw at pre-backfill stage will include 100% of the land cost less amount of borrower down payment.
Progress Draws
Advance #1
Completion of Foundation. Construction is 16% complete leaving 84% to be completed
Construction Cost ($150,000) X 84% = $126,000 holdback. (which is cost to complete)
Approved Loan Amount - Holdback = $160,000 - $126,000 = $34,000 Gross Advance minus 10% Builder Lien Holdback for 45 days which gives net advance.
Advance #2
Roof on, exterior walls, roughed in plumbing, wiring and insulation. Construction is 55% complete leaving 45% to be completed. Construction Cost ($150,000 X 45% = $67,500 holdback (which is cost required to complete)
Approved Loan Amount - Holdback ($160,000 - $67,500 = $92,500 Gross advance
Gross advance - minus previously advanced = ($92,500. - $34.000) = $58,500 Net Advance minus Builders Lien Holdback of 10%
Advance #3
Interior Complete Construction is 80% complete leaving 20% to be completed
Construction Cost ($150,000) X 20% = $30,000 holdback (cost to complete)
Approved Loan Amount - holdback = $160,000 - $30,000 = $130,000 Gross advance
Gross advance - minus previous advanced = ($130,000 - $92,500) = $37,500 Net advance minus Builders Lien Holdback of 10%
Advance #4
Building Complete - Construction is 100% complete leave 0% to be completed
Construction Cost ($150,000) X 0% = $0 holdback (cost to complete)
Approved Loan Amount - holdback = $160,000 - $0 = $160,000 Gross Advance
Gross advance - minus previous advanced = $160,000 - $130,000) = $30,000 Net Advance minus Builders Lien Holdback of 10%.
If you have any further questions about construction financing, please feel free to contact us anytime.
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