New construction mortgages can be done on a completion basis or a progress draw basis.
- Completion mortgage would be advanced once construction is 100% complete
- Progress draw mortgages are advanced as construction progresses
New construction mortgages can be done up to a maximum of 95% of the cost of the land plus construction costs. They can be done with construction being carried out by a new home warranty builder, and can also be done on a self-build basis. Lenders will want to know that you have the experience and skills to handle the project. Not everyone will be approved to do a self-build, but for those with the experience and skill set required it can be an economical choice.
With progress draw mortgages, interest is charged at the rate of the mortgage as funds are drawn at some lenders. Others charge a higher rate during construction and then change to the fixed rate in effect once construction is complete.
- Some lenders charge a fee up front which takes care of the charges involved with processing the draws
- Some lenders do not charge a fee but you would pay for inspection fees and legal fees at the time of each draw
- Most lenders require clients to have some funds available for contingency’s or cost over runs, normally about 10% of the cost
Contact us to discuss your options for financing new construction!