Calgary has a lot of custom-built homes, and if you’re about to undertake a construction project – whether it’s a new home or a commercial property – we will find you the very best rates and terms for your endeavour. Construction loans are very common but certainly not your standard mortgage.
With a construction loan, while work on your property is being completed, you are only required to pay the loan’s interest on funds withdrawn. The principal of the loan comes due when the project is finished to your satisfaction. For homes, this generally means once a certificate of occupancy has been issued.
At this point, the regular mortgage takes over and you start making payments towards the principal as well. Just like a regular mortgage, the minimum down payment is 5 per cent but you will have to have funds to get the building process started.
With a construction loan you may be able to purchase the land as part of the mortgage, but you would have to have a minimum of 50 per cent down payment on the land component. Once construction is complete, this can translate into 5 per cent down but initially, without a residence on the land, your will have to come up with 50 percent to put down on the land.
If you already own the land on which the project will be built, that can be considered equity on the loan. If you’re a homeowner, you can also choose a program where the construction loan is converted to a mortgage loan after the home’s certificate of occupancy is issued, meaning you only need to repay one amount.
If you’re a home builder building of a spec home, this type of product will work well for you too!