Custom Homes in Calgary: Financing Steps

Financing the construction of a new home is a bit confusing if you are not familiar with the process. Clients often ask custom home builders in Calgary questions about financing. Getting clear answers helps clients understand this important part of the home building process.

New home construction financing is not the same as financing the purchase of an already built structure. You finance the construction through a special loan called a progress draw. This loan releases money to the builder at set intervals to pay for the materials and labor of the construction process. At the end, you pay off the construction loan with a completion mortgage that you pay off like a regular mortgage.

The Steps

Here are the steps involved with financing a custom home in Calgary.

• New Home Estimate. You will need to get a new home estimate before you can arrange financing. This will tell you how much the builder estimates your new home will cost to build.

• Find a Lender. With the new home estimate in hand, you will need to find a lender who will finance the progress draw loan. With years of experience in building custom homes Calgary builders often have recommendations on good lenders.

• Get the Down Payment and Sign the Loan. You will have to put a down payment down with the lender and get the formal loan process completed. If you own the land that the house will sit on, many lenders will allow that to stand as the down payment. The interest rate will likely be higher than a mortgage rate, but the loan will be much shorter (usually six months).

• Construction Period. Once the financing is in place, the builder can start construction. At given intervals, the builder will request draws from the finance lender to cover construction costs. The level of completion is certified with a formal report done by a licensed appraiser. Here is an example of a typical draw schedule:

• First draw happens at 16 per cent completion
• Second draw happens at 50 per cent completion
• Third draw happens at 75 per cent completion
• Fourth draw happens at 100 per cent completion

• Completion Mortgage. About a month before the home's completion, you will need to get the completion mortgage in place. Once construction is done, this mortgage will pay off the construction loan. This is the mortgage that you will pay off on the indicated schedule.

Financing is an essential part of the custom home building process. With years of experience in building custom homes Calgary builders can often make this process easier for the client.

Fine Line Homes is proud to be a leader in Calgary home builders. When it comes to building custom homes Calgary residents will benefit from our energy-efficient home designs that create affordable, custom dream homes. Contact us today to get your dream home plans underway.

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