Many home buyers are attracted to new home construction. They want to be able to pick design elements, colors, and finishing of their home and so they choose to have a home built for them. Most of the residential house construction companies operating in Calgary have experience trying to help buyers obtain financing to purchase one of the new homes. For the most part, financing a newly build home can be a challenge. The interest rates and mortgage terms available are basically the same as with any other mortgage products. However, the method that the money is paid to the builder, the timeline, and the process are completely unique.
Educate yourself, educate your builder!
Most home builders want to be paid with a draw mortgage. This is a mortgage that you apply for as the home buyer that is arranged to release the entire mortgage amount to your new home builder in several smaller portions progressively as the home gets constructed. So for example, the builder might get 30% of the money once the basement is poured, might get another 30% once the house is fully framed and at the lockup stage, and then might get an additional 30% once the home is 90% completed.
The advantage of a draw mortgage is that it feeds money to the builder to use to keep on building the home and as the progress occurs. The downside to the draw mortgages is that for many builders, the money release schedule is not convenient or well matched to the actual costing of the home construction progress.
Having a good construction mortgage will make your builder happy! Which can make the process much less stressful for everyone!
Calgary Mortgage Broker