Mortgage FAQ

The process generally begins with a detailed assessment of your building plans, construction budget, land value, projected completed property value, and financial situation. Your lender will want to understand the total cost of the project and ensure the proposed financing is sufficient to complete the build.Once approved, the mortgage funds are released in stages. These progress draws are typically tied to construction milestones, such as completing the foundation, framing, and major systems, with a final draw issued when the home is substantially complete. An inspection or appraisal may be required before each draw to confirm that the work has progressed as expected.One of the key benefits of construction financing is that you generally pay interest based on the amount of money that has actually been advanced.

The down payment required to build a home in British Columbia depends on the type of construction financing you qualify for, the cost of the project, the value of the land, and the lender's requirements.For many construction mortgage projects, borrowers should expect to contribute at least 20% of the total project cost or completed property value, although the exact requirement will vary base on whether you own the land fully or partially. Do you have enogh fo your contributions from cash savings, equity in land you already own, or a combination of both to reach the first draw of funds.

Construction mortgage progress draws are how your lender releases funds throughout the building process instead of providing the entire mortgage amount upfront.With a traditional mortgage, the full loan is typically advanced when you purchase your home. With construction financing, the lender releases money in stages, or "draws," as construction progresses.The exact number and timing of draws can vary by lender and project, but a typical construction mortgage may involve several stages:Initial Draw – Funds may be released to help begin construction, depending on the lender's requirements and the borrower's initial contribution.Foundation Draw – Once the foundation is completed, Framing or Lock-Up Draw – Funds are released as the structure reaches the required stage Mechanical and Interior Draws – Additional funds may be advanced as plumbing, electrical, insulation, drywall, and other major components are completed.Final Draw – The remaining funds are typically released once the home is substantially complete and the lender's conditions have been satisfied.Before each draw, the lender may require an inspection or progress report to confirm that the work completed is consistent with the approved construction budget and plans. The lender then advances the appropriate amount based on the progress of the project.NOTE: That each lenders draw requirements can vary significantly.

Going over budget is one of the biggest risks when building a new home. Material costs can increase, unexpected site conditions can arise, or changes to the original plans can add significant expenses. If your construction project in BC goes over budget, how the shortfall is handled depends on the lender. The first step is to contact your mortgage broker immediately. Do not wait until the final construction draw to address a funding shortfall. Your lender will need to review the updated construction costs and determine whether additional financing is possible.In some cases, you may need to cover the additional costs yourself. This is why having a contingency reserve is so important.