New Construction Financing

Building a home is a complex process...Your mortgage shouldn't be.

Before deciding on a brand new home, let your local Steenbeek Mortgage Team specialist help you understand the special terms and considerations in construction mortgages.

Home builders have specific preferences when it comes to the type of construction mortgage they need, which is where a mortgage broker comes in.

One type of builder mortgage is the Construction Completion Mortgage. This type of mortgage ensures that your mortgage’s terms and conditions will not expire while the home is being built. It is required when a builder constructs a home from start to finish using their own funds. Because the building process can take anywhere from six months to two years, the bank will guarantee a rate for the entire build time. This can be risky for banks because interest rates can rise during this time. To offset the risk, the interest rates that are offered are higher than the typical 120-day rate holds. The good news is that the rate will not go up if rates were to rise.

We review completion mortgages 90 days before the possession date. If rates are lower than the construction completion mortgage rate, and you still qualify for the mortgage, we can lower the rate. This added service allows you to feel confident, knowing you will always get the best deal. Your mortgage details are finalized at the very end of the process.

Another type of builder mortgage is called Progress Draw Mortgage. This mortgage is set up to allow the builder to use the lender’s money during the building process. When the home is approximately 30% complete, the builder will ask for the construction draw mortgage to be partially drawn on. Most details of this mortgage are finalized when the first draw is taken. The term will be selected, and the full down payment will be given to your lawyer, and your mortgage amount will be set. The interest rate is locked in (if you choose a fixed-rate mortgage term.) When your builder constructs your home further, they will draw on your mortgage a second, third, and up to a fourth time.

Before deciding on a brand new home, it’s important to understand all of the special terms and considerations in construction mortgages. Have no worries, Steenbeek Mortgage Team is here to help!