New Construction Mortgage Options
If you are building your own home, or are having a contractor build one for you, you know how complicated the process can be. Going through the mortgage process for a new construction home shouldn’t be as complicated. There are now a variety of financing options available for newly constructed homes and you can visit a Burlington mortgage broker to see the options available to you. Construction financing falls under one of three categories; purchasing a home that has been newly constructed, constructing your new home yourself, and hiring a contractor to build your home.
What is a Construction/Builders Mortgage?
With a construction mortgage, you have a mortgage amount that you can draw funding down from during predetermined construction stages. These mortgages are issued on a progress advance basis. The amount is based on how much you need to complete the home. This amount is given to you at certain stages, or draws, which are various completion levels. For example, the second draw tends to happen at 65% completion, or just before drywalling is put up.
Should you own the land that the home is being constructed on, you can use this as equity for the first financial advance. If the land has not been purchased yet, this first advance can be made available to you to help you with purchasing a vacant lot of land.
New Construction Mortgage Options
Homes Built By a Contractor With Your Funds
In this situation you have a customer entering into an agreement with a registered builder to build their home. The builder will then require a Financing Draw. The financing options available in these situations are a Completion Mortgage or Progress Draw. Your Burlington mortgage broker will advise you on these options.
Self Constructed Home
This is a situation where the customer is building their own home, or acting as their own contractor. They will hire out sub-contractors for specialty work, such as electricians or plumbers. The same financing options are available as with homes being built by a contractor.
Builder Constructed Home Using Their Funds
These are situations where a builder pays to construct a building, for example, a condominium, townhouse, or new construction home and then sells that completed home to a buyer. The financing option for this is a Completion Mortgage.
What Each Mortgage Offers
When you are buying a newly constructed home that a builder has paid for and constructed, you only need funding upon completion of the home. This is basically a traditional residential mortgage.
Progress Draw Mortgage
With this financing option, funding is advanced at intervals as the house is being constructed. There are usually 3 draws, one at 35% completion, one at 65% completion, and 100% at total completion. If the customer is also buying land then a conventional Land Draw may be needed. A Progress Draw also requires the involvement of a solicitor.
Documentation Needed for a Builders Mortgage
This is pretty standard to what any Burlington mortgage broker requires for a traditional mortgage; proof of identity, confirmation of income and employment, proof of equity, and quote copies if the home will be self-built. You may also need a signed contract with the builder you have chosen, a copy of the title if you already own the home and any land registry information. Lastly, a full appraisal, insurance certificate, and a House and Plans Specification will be needed.