Building a home is an exciting time and there’s lots to cover. Check out our step-by-step guide or watch the video below to learn about the construction mortgage process. You’ll be breaking ground in no time!
Choose a home plan that you want for your land and finalize blueprints with your builder. Determine square footage and make decisions that will affect cost (i.e. how you plan to heat the home or if you are going to fully finish the basement or just partially finish it).
Our experienced mortgage professionals can walk you through the process and help you determine the approach that works best for you. We’ll also calculate the maximum mortgage you can qualify for and help you determine the costs.
If you have access to funds to purchase the land where the home is to be built, it may be purchased in advance and considered part of your equity. However, we do not recommend that you purchase your lot prior to a mortgage being approved.
This will help you to determine how much money you’ll need to build your home. Remember to include all applicable taxes. This takes into account everything from installations, to interior and exterior finishes, the roof system, flooring, fixtures and even landscaping. A 'Cost to Complete' form can be provided upon request.
Take your quote with the plan or blueprints to a certified appraiser and request a 'Blueprint Appraisal'. This cost will be your responsibility and the same appraiser must be prepared to come out to do progress inspections during your building project. You’ll need to provide the appraisal firm with specific information including your contractor's quotes and material specs in order for them to determine a value.
Once you’ve provided your mortgage professional with the information that they requested at your first meeting, we can begin to put an application together. Now that you’ve established what your home will cost you and its finished value, bring your information to your Mortgage Professional. At that point, we can do our best to structure a construction mortgage to suit your needs. We have multiple financing options including Genworth Financial, CMHC or conventional financing. Only after approval has been provided can ‘Confirmation of Financing’ be provided to your builder or contractor.
Your mortgage ‘Land Title’ must be registered by your lawyer and these costs are not included in your mortgage amount. No funds can be advanced from the mortgage proceeds before the mortgage has been registered with Land Titles; this process usually takes two to three weeks.
Your signed contract with your builder or contractor will outline how much they’ll be looking for at particular stages. Encompass Credit Union will advance funds on a ‘Cost to Complete’ basis, usually in five advances. They are loosely termed as:
- Holdback funds released
Your own funds must be fully used first, and then we will begin to advance the mortgage funds. The appraiser who completed your blueprint appraisal must go out and inspect the work. We will be provided with a ‘Progress Inspection’ and we will advance funds based on the percentage of work completed, less a 10% holdback amount. For example, if the home is 61% complete, we would advance funds to reflect that.
The 10% holdback amount will be released in one lump sum 45 days after the final inspection of the completed home.