Building a Custom Home in Durham Region? How Construction Financing Works
A lot of people dream about buying a lot and building their own home. Very few know what the financing side looks like before they start. Here's what I want you to know before you sign anything.
Financing a construction project is different than financing a residential property
Lenders see a build as riskier than a finished home. A finished house can be appraised and sold. A half-built one is much harder to value. That means fewer lender options and a larger down payment than you'd need to buy an existing house.
Construction mortgages pay out in stages
With a regular purchase, the lender pays out the full mortgage on closing day. A construction mortgage releases funds in draws as the build hits set milestones. Before each draw, the lender typically confirms the work is done.
That means you need a plan to cover costs between draws. Builders and trades don't always wait for the lender's schedule.
Your budget needs breathing room
Material prices change. Permits take longer than expected. Weather and trades cause delays. Each one adds cost, and many of those costs land in the middle of the build. Build a contingency into your numbers from day one.
Plan the financing before you buy the lot
The lot, the build and the final mortgage all need to fit together. Buying land first and figuring out the rest later is one of the most common ways a build gets stuck. Line up how you'll pay for each stage before you commit to the land.
Hear it from someone who's done it
On Real Stories in Real Estate, I talked with Jay White about building your own home. If this is on your wish list, it's worth a listen.
Thinking about building? Let's talk before you buy the lot. Never be too shy to call.
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