Construction Mortgages in Canada: What to Know

Are you looking for a mortgage to build a home in Canada? Construction mortgages, also known as builder’s mortgages, are specialized loans that finance the construction of a new home or other building projects.

These specialized loans are designed to finance the construction of a new home or other building projects and provide funds in stages as your construction project progresses. This gives you the flexibility to pay for labour and materials as they are needed, and the loan is paid off once construction is complete and the property is sold.

Types of Construction Mortgages

There are two types of construction mortgages: draws and completions:

  • A draw mortgage is a method in which you pay a percentage of the loan as the funds are “drawn” from the lender to fund the project. This can be an ideal product for small builders who don’t have sufficient resources to build using their own funds or for individuals who want to build their own homes and need the mortgage funds available to complete the project. The interest rate is typically locked prior to the first draw of funds.
  • A completion mortgage is one where the builder does not require the use of the borrower’s funds during the construction of the property. This type of financing offers greater flexibility to the borrower, such as making installments toward their down payment or selling another property, however, many lenders do not lock in an interest rate for the entire construction period, so it is important to talk to your mortgage advisor about which options you are most comfortable with and which is best suited to your particular needs and qualifications.

Getting a Mortgage for a New Construction Project

Construction mortgages are a great way to get funding for your home while you’re building it. Before trying to understand if you’re eligible for it and shopping around to compare construction mortgage rates, find a professional to guide you through the process. This way, you can save time and will ensure that you’re on the right track.

Construction loans may require an upfront payment, to cover the expenses of the building. However, unlike traditional mortgages, the collateral for a construction loan is an incomplete home, which is considered riskier for lenders due to its lower value. To assess your eligibility for a construction loan, lenders will closely examine your credit score, income, and debt levels.

Getting a construction mortgage is easy with Enrich Mortgage Group. Our experienced mortgage agents will help you understand the construction mortgage requirements and guide you through the process, from start to finish.

Why Choose Enrich Mortgage Group for Your Construction Mortgage

Enrich Mortgage Group is your trusted partner for all your construction mortgage needs. We understand the intricate requirements of construction projects and have the expertise to provide you with the financing you need. Our team of experienced mortgage professionals is dedicated to helping you find the most favourable construction mortgage rates and terms, and we are committed to guiding you through every step of the process.

Whether you are planning to build a new home or undertake a major renovation project, we can help you secure the funding you require. With our personalized approach and industry knowledge, you can be confident that you are making the best decision for your construction project.