How does Financing the Build of a Home Work?

Getting a construction mortgage is different than getting a mortgage to purchase a home. Here is what you need to keep in mind:

1. When applying for a mortgage to build a home, you will also need to provide the following documents:

• Complete set of blueprints
• Specifications of materials
• List of cost estimates for proposed building construction
• Copy of any contractual agreements entered into concerning building construction and payment by stages
• Land surveyor’s site survey

2. When building a home, the mortgage funds are not advanced all at once. The mortgage funds are advanced according to the amount of work completed at each of the following four stages of the construction:

Stage 1: Foundation - excavation, footings, foundation, damp-proofing, weeping tile, and back fill.

Stage 2: Complete framing – finished framing, roofing, rough plumbing (including septic tank and field if applicable) roughed-in electrical plumbing and heating, exterior doors and windows installed.

Stage 3: Interior finishing completed - complete drywall, finish carpentry, painting, electrical, plumbing and heating complete, interior doors and basement floor.

Stage 4: Final inspection, home is complete

3. During the construction phase, you will have the option of having a variable open or variable closed mortgage and will only be required to pay the interest on your mortgage. Once the construction phase is completed, regular mortgage payments commence. At this time, you can select to stay with a variable mortgage or switch to a fixed rate mortgage.