PROGRESS ADVNACE MORTGAGE PROGRAMS:
This page contains some very general information for borrowers who need mortgage financing to build their own homes they plan to occupy. Generally speaking, 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. For borrowers with less than 20% equity, mortgage default insurance will be required. That means the policy guidelines of the mortgage insurer (such as CMHC) must be followed. Because so much information is required at the outset, no pre-approval is available for construction/building financing.
1. Using Qualified Builders
Having your new home built by a qualified new home builder provides peace of mind by acquiring the expertise of the builder at often a fixed contract price. Some builders offer added peace of mind even after your home is built through a new home warranty plan. Usually, the builder must be a member of an approved New Home Warranty Program,
Steps to Build Your Dream Home:
Step 1 – What’s needed?.
Signed & accepted copy of building contract.
Builder’s construction specifications, House Building Outline Specifications.
One complete set of house plans and working drawings (blueprint).
Site plan showing legal description, proportionate dimension’s of property in detail, proposed location of house on property and other improvements.
Directional map to property.
Step 2 – A Market value of new home to be built
An appraisal of new home to be constructed will be obtained. Appraisal may not be required if the builder is a member of a recognized warranty plan.
Step 3 – Build Your New Dream Home!
2. Self-Build (Owner-Builder)
If you have good knowledge of the home building process (in the eyes of the lender and/or mortgage insurer) you can act as your own general contractor to oversee and build your new home. Arranging and overseeing the construction of your new home does require expertise and a great deal of time. More direct involvement can eliminates the contractor fees. However, lenders will want to see construction completed, usually, within 6 months. New Home Warranty will also be an issue for owner-builders. In British Columbia, please go to the following Web pages for additional important information:
- National Home Warranty Program for Owner-Builders in British Columbia
- Homeowner Protection Office – Branch of BC Housing – Owner-Builders
Steps to Build Your Dream Home:
Step 1 – What’s needed?
Copy of land contract if land is being purchased or copy of land title if owned.
Completed House Building Outline Specifications.
One complete set of house plans and working drawings (blueprint).
Site plan showing legal description, proportionate dimension’s of property in detail, proposed location of house on property and other improvements.
Completed Cost Projection for New Home Construction.
Directional map to property.
Step 2 – A Market value of new home to be built
An appraisal of new home to be constructed will be obtained.
Step 3 – Build Your New Dream Home!
Progressive draws:
Advances will be made as construction progresses, always holding back the cost to complete construction and any provincial lien holdback requirements.
When the construction of your home has progressed to an appropriate stage, a portion of your mortgage may be advanced to pay for the work completed (subject to a lien search of the title). An inspection may be required prior to an advance of the mortgage to ensure the work has been completed. Listed below is just an example of a standard mortgage draw.
- Pre-construction (if necessary)A portion of the mortgage may be advanced prior to commencement of construction to pay a portion of the land price.
- 1st Progress DrawBasement ready for backfill
16% of approved mortgage advanced - 2nd Progress DrawInterior ready for drywall
33% of approved mortgage advanced - 3rd Progress DrawDrywall installed and taped
26% of approved mortgage advanced - 4th Progress House completed
25% of approved mortgage advanced
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