Building a Better Future: Financing That New Home Build

Many Canadians are looking to build a home of their dreams; however, they’d like. This is a new build that is completely different from purchasing an existing home that is already built. If you want to build a completely new home, then you need a specific type of loan in order to build it. This is because it is not a traditional mortgage loan that you would have.

Understanding these mortgages and construction loans is going to help you make the best decision on which one to go with. You want something that works with your needs, and through the use of this information; you can get just that.

Read on to find the information we’ve gathered on new construction loans and being able to build the home of your dreams. You will be glad you did when you find out how easy it is to build a home with a new loan.

Creating a Custom Home of Your Own

Creating a custom home is a great idea for so many who want something specific out of the build. If you’re considering a custom home of your own, then consider the loan that you will have to borrow to help you complete that home.

A construction mortgage is the mortgage type that you will need to borrow in order to build a custom home of your own. You can get the right support not only from the builders who are building the home for you, but also the bank that is providing this type of loan for your home build.

There are a number of important facts to consider and know, that include but are not limited to:

  • Designing the house plans with an architect 
  • Managing your house construction costs 
  • Arranging for the best construction mortgage
  • Hiring a contractor for the build 
  • Obtaining building permits 
  • Constructing your house

Get a simple, affordable, and effective construction mortgage that offers the best possible outcome. You should be able to build your dream home with the right help right around the corner. Enjoy the many extras and offers that come from the many places you can obtain the right construction loan for your home.

Mixture of Mortgage Options

There are a number of mortgage options that you can choose from when you are looking at building your own home. You can choose a construction mortgage, a traditional mortgage or even use a mixture of the two depending on the build and specifics of the home.

You will also want to look into the lender’s policies based on the territory or province that you are living in. This can make a difference on how you borrow for the home that you’re looking to build.

Home Construction VS a Traditional Mortgage

Home construction loans differ from the regular mortgages that you can get. You can expect to find differences in the terms of the loan, as well as when you get the loan. Construction loans are meant to be more short-term loans and a way to finance your new home construction, allowing different stages of money to be disbursed to the team that is building the home.

Mortgages have longer terms and lower interest rates, and they are something that pays out all at once to purchase an existing home. These are the major differences between the two.

How Do These New Construction Loans Work?

These new construction loans are also called draw mortgages. This process involves being financed through the lender and then the lender paying the construction crew in stages to cover the costs of labor and materials needed to build your new home. In some instances, these funds might be sent to your lawyer who then sends the amounts to the builder.

The contractor does not receive the entire loan amount up front, but in stages because this is how the building and payment process works. The contractor only receives the full amount if they construct the home fully. This ensures that the home is completed and that the fund are provided.

Most lenders allow up to 75% of the cost of the home build to be covered through the loan. The other 25% has to be covered by the buyer of the home. Keep this in mind, as this is your down payment on the new construction or build of the home. You can put it all together through the bank though that releases the payments on time throughout the build of the new home.

The amounts that the lender offers is done in percentages depending on the work that has been completed by the crew. This is important to keep in mind, as you want to ensure that you’re getting the right construction, but that the crew is being paid on time, as they should be.

It is important to be prepared for the build you’re going to be doing. You want the best outcome, and through the use of the right contractor or construction loan; you can be sure that it is something worth spending some time on and getting to know more about. Your dream home is waiting, just make sure you have the financing in place first.

Frequently Asked Questions About Financing That New Home Build

 What happens to the construction loan once the construction is complete?

The construction loan that you have, once construction of the home is complete, is usually turned into a conventional mortgage, rather than it continuing to be a construction loan. Unless, of course, you’re able to pay the entire construction loan amount off in full.

Can I purchase land with the construction loan that I receive to build my home with?

You’re likely going to need land to build your new home on. This is something that is released during the first phase, so you are easily able to purchase the land that you want to build the home on. This is important and depending on the price of the land, the bank will release the amount that is needed to purchase it first before bui9lding is able to begin.

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Amanda Leach

Fifteen years can be a long time to work in one industry, but not when you are doing something that you love. Amanda has enjoyed the freedom of working as a freelance writer for the majority of her career. She has successfully combined her passion and skill for writing while still enjoying a life filled with travel, learning and exciting new experiences. While she loves exploring all different types of writing, her PhD in Consumer Psychology has made her a sought after writer for marketing, business and technology fields. Amanda is a regular contributor to Smarter Loans.