New Build Mortgages
Looking to buy a newly built home?
Learn about the latest insured mortgage rules, long-term rate holds, and construction (draw) mortgages — plus, what to do as your possession date approaches.
As a Top 1% Mortgage Broker in the GTA, Pankaj Aggarwal can guide you through the process and help you secure the best mortgage options for your new home.
Building the Way to Your Best Mortgage
The stage of your home build will affect your mortgage rate and options — here’s what you need to know.
Buying Your New Build with Possession Within 120 Days
You’re in luck — this is treated like a typical home purchase for your first home or next home. You won’t need to guess about future rates or payments. You’ll have access to your best rate and mortgage options, with the lender that suits your needs. As a Top 1% Mortgage Broker in the GTA, I, Pankaj Aggarwal, can help you find the right fit to save you the most.
New Insured Mortgage Rules for Newly-Built Homes
Effective December 15, 2024:
All insured purchases of newly-built homes (including eligible first-time buyers) can extend amortizations from 25 years to 30 years, lowering payments and making mortgage qualification easier — an added insurance premium applies. Have questions? Let’s chat! As a trusted Ontario mortgage broker, I’ll help you understand the details.
Buying Your New Build with Possession More Than 120 Days Away
If you’re buying a home long before it’s ready — like months or even years away — and the builder is funding the construction themselves, you may want to consider a long-term rate hold:
- Typically, long-term rate holds are available directly through big banks.
- The rate will carry a premium for the luxury of locking in early, but if rates rise, you’ll benefit from that lower rate you secured.
- If rates drop, you can wait until 120 days before possession and potentially get a better rate.
- Recreational zoning, used for leisure, not primarily for living
- A rate hold doesn’t lock you into staying with the lender, so you’ll have options as your closing date nears.
- Be aware that big banks may offer higher rates compared to monoline lenders or other options. As a Top 1% Mortgage Broker in t
Draw (Construction) Mortgages
While most builders fund their own builds, smaller or custom builders (often for luxury homes) may require you to fund the building process based on completed milestones. This may be done through a Draw Mortgage.
How a Draw Mortgage Works:
- You’ll hold the title to the property since it’s technically considered a purchase contract.
- Most draw mortgages will have a rate locked in at the time of possession.
- You might have the option of an open or closed draw mortgage:
- Open draw mortgages offer flexibility to switch lenders but may come with a higher rate.
- Closed draw mortgages typically come with a lower rate, but you may face penalties if you want to refinance or switch lenders before your mortgage term ends.
- If your draw mortgage is with an A lender, it’s likely a closed mortgage with a lower rate.
- If your lender is B or private, it’s likely an open mortgage with a higher rate.
Can You Get Out of a Draw Mortgage for a Better Rate?
A draw mortgage spans months or even years as your new home is built. If you’re locked into a higher fixed rate compared to market rates, you may face a penalty to break the mortgage. Alternatively, you can wait until your renewal date to switch without penalty, though fees may apply. If you need a friendly reminder when it’s time to renew, schedule one with us.
Breathe Deep with Great Advice for Your New Home
If your home possession is within 120 days, talk to me for unbiased advice on your best mortgage options. Are you a first-time homebuyer? You may be eligible for rebates that can ease the financial load.
Check out our blog for tips on new builds, like the documents you’ll need to provide or getting your GST rebate. With volume rate discounts and expert advice, we’ll ensure a smooth process for you — whether online, over the phone, in person, or through a Mobile Mortgage Broker that comes to you.
Wherever you are in Canada, I’m here to help you secure the best mortgage rates and second home mortgage solutions tailored to your needs
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