Builder FAQ

Looking to Build a New Home? Here’s What You Need to Know

What kind of mortgage options are available for new construction?

We’ve got access to a range of mortgage products for new builds, including rate caps from 4 months up to 12 months.

What’s a rate cap, and how does it work?

A rate cap locks in the highest interest rate you’ll pay for your mortgage. It’s based on the rates when you apply, minus any discounts that might be available. That way, you’re protected from rising rates while your home is being built.

Can I stay in my current home while my new one is being built?

Yes! Some self-build or progress draw mortgages allow you to stay in your current home while construction is underway—but it depends on lender approval. If approved, you could avoid the cost and hassle of moving into a rental. Just keep in mind that the lender will likely want to see proof of sale on your current home once your new place is nearly finished.

Should I sell my current home before starting construction?

Some people prefer to sell before building to have more cash flow and peace of mind. It’s a personal choice, but selling ahead can reduce financial pressure while your new home is being built.

Can I extend my rate cap?

No, the rate cap is locked in for the period you choose. Once it expires, the current rates will apply.

What if my insured mortgage is approved, but I can now afford a conventional mortgage?

If you switch to a conventional mortgage, you’ll still have to pay the original insurance premium since it was part of the initial approval terms.

Is the land draw included in the first draw?

Yes, if a conventional mortgage approves a land draw, it’ll be split from your first draw. Just keep in mind that land draws are only available on traditional mortgages.

Can I get a land draw if I already own the land?

Possibly! If the land is free and clear or you have a loan secured against it, the lender may approve a land draw—but it’s subject to their approval.

What if my house is 95–99% complete? Will the lender treat it as 100% complete?

Most lenders will only fund once the house is 100% complete, but they typically allow a 3% holdback for seasonal work (like finishing the driveway or landscaping). They’ll release the remaining funds once a final inspection confirms completion.

Can I change the terms of my mortgage after the first draw?

Yes, in some cases, you can adjust the final terms before you sign the final mortgage documents—but only after the house is complete.

Can I transfer my existing mortgage to a new construction mortgage to avoid prepayment penalties?

Yes, but there are rules. For completion mortgages, you’ll need to return to your existing lender within 90 days of paying off the old mortgage to maintain portability features. For progress draw mortgages, the first draw must happen within 90 days, and the final draw must be completed within 12 months. Prepayment charges are usually refunded once the final mortgage is advanced.

How long do I have to finish building?

There’s usually no hard deadline, but the lender may stop advancing funds if progress stalls. Sticking to your construction timeline is key to avoiding delays and extra costs.

Do I pay interest on the entire mortgage amount or just what I’ve borrowed so far?

You only pay interest on what you’ve actually borrowed. As construction progresses and you draw more funds, your monthly interest payments will adjust accordingly.

What’s the Construction Lien Act, and how does it affect my project?

The Construction Lien Act protects all contractors and suppliers by allowing them to place a lien on your home if they aren’t paid. Lenders typically hold back 10% of each draw until 45 days after the project is substantially complete. Discussing the details with your lawyer is a good idea so you’re clear on how this works.