Construction Financing Steps
The Mortgage Group Canada Inc.

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  Construction Financing also known as Draw Mortgages

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  Mortgage financing is available to purchase serviced land and then to build a home.  Depending on the type of Builder, the following will be required:

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  1) Qualified Builder
  Have your home built by a qualified Home Builder at a fixed price.
  
  2) Self Builder
  Acting as your own general contractor where you sign contracts with sub-trades.

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  Documents Required:

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  1) Qualified Builder
  
   a)  Signed and accepted copy of building contract
   b)  One complete set of house plans and working drawings  (blue prints)
   c)  Site Plan showing legal description, dimensions of property in detail
   d)  Confirmation Builder is a “New Home Warranty” builder
   d)  An Appraisal indicating final value once the home is constructed

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  2) Self Builder
  
   a) Copy of Land Contract if land is being Purchased of copy of Title of land already owned
   b) Resume confirming good knowledge of the home building process
   c) One Complete set of house plans and working drawing (blueprint)
   d) Site Plan showing legal description, dimensions of property in detail
   e) Copy of all Sub-Contracts which confirm Home Construction Costs
   f) An Appraisal indicating final value once the home is constructed.
  
  Most Lenders have stages for mortgage draws:

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  1) Foundation/Backfill  - 25% complete.  The foundations are in place and backfilling is complete, plus work is being done on framing
  
  2) Lock-Up is generally at the 40% completion stage.  The property now has limited access as doors and windows are installed, and the roof is on
  
  3) Drywall is approximately 65% complete.  Drywall is installed and taped with lighting and electrical 90% complete.  The furnace and water heater are installed and functioning.
  
  4) Home is 100% complete.  Home has been inspected and the occupancy certificate has been issued. 

  At each stage, a specific percentage of the building funds are advanced based on a cost to complete basis and always supported by an inspection report from an approved appraiser.  Funds are directed to the Borrower’s lawyer who insures that the appropriate construction lien holdbacks are maintained, prior to releasing funds to the Borrower or builder.
  
  Advance #1

  Completion of foundation.  Construction is 16% complete leaving 84% to be completed Construction Cost ($150,000) X 84% = $126,000 holdback.
  (Which is cost to complete) 
  
  Approved Loan Amount – Holdback =  $160,000 - $126,000 = $34,000 Gross Advance…minus 10% Builder Lien Holdback for 45 days which gives net advance.

  Advance #2

  Roof on, exterior walls, roughed in plumbing, wiring and insulation.  Construction is 55% complete leaving 45% to be completed.

  Construction Cost ($150,000 X 45% = $67,500 holdback  (which is cost required to complete)
  Approved Loan Amount – Holdback  ($160,000 - $67,500 = $92,500  Gross advance
  Gross advance – minus previously advanced = ($92,500. - $34.000) = $58,500 Net Advance minus Builders Lien Holdback of 10%

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  Advance #3

  Interior Complete Construction is 80% complete leaving 20% to be completed
  Construction Cost ($150,000) X 20% = $30,000 holdback  (cost to complete) 
  Approved Loan Amount – holdback = $160,000 - $30,000 = $130,000 Gross advance
  Gross advance – minus previous advanced = ($130,000 - $92,500) = $37,500 Net advance minus Builders Lien Holdback of 10%

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  Advance #4
  Building Complete – Construction is 100% complete leave 0% to be completed
  Construction Cost ($150,000) X 0% = $0 holdback (cost to complete)
  Approved Loan Amount – holdback = $160,000 - $0 = $160,000 Gross Advance
  Gross advance – minus previous advanced = $160,000 - $130,000) = $30,000 Net Advance minus Builders Lien Holdback of 10%.

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