New Build Mortgages

Building the way to your best mortgage.

The stage of home-build you're buying into can affect your rate and mortgage options, whether you're buying pre-construction, during construction, or closer to construction completion.

To cover financing for a new build, you may need or be required to get:

• A long-term rate hold with a big bank
• A construction or draw mortgage
• A completion mortgage
• A typical home purchase mortgage approval, if the new build's scheduled completion falls within a lender's standard rate hold period.

Buying a new build ready in the next 120 days?

Home Purchase Mortgage Approval

You're in luck — your new-build purchase is treated as a typical home purchase mortgage application, whether it's your first home or next home, as most lenders have a 120-day rate lock-in period.

You won't need to play a guessing game about future rates or payments, and can access your best rate and mortgage options with the lender that best suits your needs. (An expert, salaried True North Mortgage broker can find the right fit to save you the most.)

Buying a new build that's more than 120 days out?

Long-Term Rate Hold

If you're buying long before the finished build, for example, several months or even 1 or 2 years away — and the builder is funding the build themselves — you can look into a long-term rate hold:

• Typically, you can only get a long-term rate hold directly with a big bank
• The rate will carry a premium for the luxury of the wait
• Despite the premium, you may benefit if rates end up going higher — you'll be able to lock in with that lower rate you held so long ago
• If rates end up lower than your long-term hold, you can wait until within 120 days of your possession date and get a better rate
• A rate hold doesn't mean you're obligated to stay with the lender, which is why you'll have options as the closing date approaches

Draw (Construction) Mortgages

Most builders fund their own builds, but sometimes smaller or custom builders, usually for luxury homes, will require you to fund the next building phase of your house based on a milestone being completed.

Like a long-term rate hold, Draw or Construction Mortgages are done through a big bank (usually at a bigger rate).

How a draw mortgage can work:

• With your purchase contract in hand, a draw mortgage is set up through a big bank.
• The mortgage is registered on the home's title.
• During the construction phase, you'll likely make interest-only payments, with full mortgage payments commencing upon possession.
• You may have the option of an open or closed draw mortgage, and the rate remains unchanged for the length of the contract.
• 'Open' would likely come with a much higher rate, but you would have the flexibility to choose a better term with the same lender OR switch lenders with no penalty.
• Some draws automatically lock into a closed term upon possession, but the rate would likely be lower than an open term.
• If your draw is with an A lender, it's likely a closed option with a lower rate.
• If your lender is B or private, it's likely an open option with a higher rate.

Can you get out of a draw mortgage to get a better rate?

A draw mortgage can span months or years as your new home is built.

If you're locked in with a higher fixed rate compared to market rates, you would have to pay a penalty to break your current loan and refinance or switch to a lower rate (check with your lender for specific details).

Or, you'll have to wait until your renewal comes up to switch without a penalty (fees may apply). Need a friendly renewal reminder? Schedule one here.

Completion Mortgages

A completion mortgage is used for a home under construction that won’t be completed for several months (e.g. 6–18 months for a new subdivision or condo project). You have to commit to buying the home, supply a deposit and mortgage pre-approval or approval, but you're not locked into a particular lender until later.

Mortgage payment begins once construction is complete, not during, and you're not required to supply funds at different stages like with a draw mortgage.

A completion mortgage requires the home buyer to:

• Sign a purchase agreement with the developer.
• Pay a deposit to the developer that will eventually go towards the down payment.
• Provide a mortgage pre-approval or approval, which offers some assurance that you can get financing upon completion.
• Closer to the possession date, you may be able to find a better deal with a different lender (like THINK Financial) as a new purchase rather than a completion approval.
• If you can't get mortgage approval from any lender upon completion, you will lose the deposit, and the developer will resell the home and may seek further compensation.

Because funds haven't been advanced during the construction phase, mortgage approval by the original lender is usually refreshed closer to possession — the original approval or rate hold will have likely expired before completion. There is no break penalty if you decide to finalize your mortgage with another lender.

That new home smell? Breathe deeper thanks to our great advice.

Talk to us if your home possession is within 120 days. We can give you unbiased advice on your best mortgage options.

Are you a first-time home buyer? You may be able to get a GST rebate or other rebates to lighten your financial load. Get even more new-build tips here, like the documents you'll need to provide.

Anywhere you are in Canada, we have volume rate discounts and down-home advice you need for a seamless process — online, over the phone, at a nearby store, or a Mobile Mortgage Broker can come to you.