Are you planning to construct a home? Are you looking to renovate your existing property? If yes, apply for a construction mortgage. If you are unsure what it is and whether you are eligible to apply or not, consult a Calgary mortgage broker to take you through the process.
A construction mortgage is a specialized mortgage that is formulated to finance or fund a construction renovation or remodeling project. No matter, whether you are building your own home or purchasing a semi-built one from a builder, this mortgage gets you covered.
Also, referred to as builders’ mortgages in Canada, you can finance your home that is yet to be started or complete one still in the semi-construction phase.
The major difference between a traditional mortgage and a construction one is the way the funds are paid out to a borrower. Unlike common mortgages where a lump sum is offered to the borrower at the time of approval, the amount is paid out in increments in construction loans. This type is often called a draw mortgage.
How Does A Construction Mortgage Work?
When it comes to construction financing in Calgary, you are required to pay a down payment that comes in both fixed and variable rate options. Once your building project is complete and you obtain a certificate of occupancy, the construction mortgage is converted to a traditional mortgage.
Here’s an example of a draw schedule for a construction mortgage:
Draw #1: 15% is paid when the excavation and foundation is completed.
Draw #2: 40% is paid when the roof is on and the building is weather-proofed with secure access.
Draw #3: 65% is paid when the plumbing and wiring are started and the plaster is complete.
Draw #4: 85% is paid when the kitchen and bathrooms are complete with doors being hung.
Draw #5: 100% is paid when the property is ready for occupancy with all exterior work done.
In the draw phase, some lenders may require a borrower to pay interest on the amount transferred while after construction, both principal and interest need to be paid.
Apply To Get A Construction Mortgage
Construction loans are not as common as residential and commercial mortgages and are often applied by builders. This is the reason only a few mortgage brokers in Calgary specialize in construction mortgages and only a small number of lenders lend money on it.
To avoid any delays or long approval processes, it’s advised to opt for a mortgage firm that has years of experience in this type of mortgage and can walk you through the process. Also, it is a more risky loan type with strict terms and conditions that must be accepted before approval.
If you are looking for a reliable mortgage broker who can help you get easy construction mortgage approval and quick funding, rely on Sandhu & Sran Mortgages. With years of industry experience, we specialize in all types of mortgage approvals, renewals, and refinancing services in Calgary. If you are interested in knowing more, feel free to discuss your needs with us.