What to Know About Financing a New Build

Buying a brand-new home is exciting. You get modern finishes, energy-efficient design, and the chance to choose features that truly fit your lifestyle. But financing a new build works differently than buying a resale home. Lenders have very specific rules for new construction, and timelines play a major role in the approval process.

This guide breaks everything down in a simple, easy-to-follow way so you can move forward with confidence.

1. Two Types of New Build Mortgages

New construction can be financed in one of two ways depending on how the home is being built.

Completion Mortgage (Single Advance)

This is the most common option.

You pay your deposit to the builder, the builder completes the home, and your mortgage doesn’t fund until possession day. Regular principal and interest payments begin as soon as the mortgage funds.

This works well for turn-key homes or homes that are already well underway.

Progress Draw Mortgage

Progress Draw mortgages are used when the home is being built from the ground up.

Funds are released in stages as construction progresses. Each stage requires an inspection, and payments during the build are usually interest only. When the home is finished, the mortgage converts to regular payments.

Not all lenders offer Draw mortgages, and these files come with stricter timelines.

2. Builder Contracts and Warranty Requirements

Lenders require detailed information about the home that is being built.

A single fixed-price contract from a licensed New Home Warranty (NHW) builder is required. Full plans, blueprints, and specifications must also be included. The property must have New Home Warranty coverage in place before completion.

Who provides these documents?

Your realtor handles gathering the full builder contract package and sending it to your mortgage broker. This includes the offer, amendments, upgrade lists, and the full specification sheets. They make sure the lender receives everything needed for approval.

Cost-plus contracts are treated as self-builds and are usually ineligible through broker channels. Lenders do not mediate construction disputes, so any issues with the builder must be handled directly between the buyer and builder.

3. Down Payment Rules and Lending Value

Minimum down payment requirements

The minimum down payment for new builds follows standard insured rules:

5 percent on the first $500,000 10 percent on the portion above $500,000

Insured mortgages can go up to 95 percent loan-to-value on new builds.

Progress Draw down payment requirement

If you are building through a draw mortgage, your full down payment must be advanced before the first draw is released.

How lenders determine your maximum mortgage

Lenders base the mortgage amount on the lesser of:

The appraised “as-complete” value or The total cost to build, which includes the contract price, land value, and other direct costs

This ensures the loan amount is supported by both the appraisal and the building contract.

4. GST and New Build Pricing

GST must be included in the purchase price for lending purposes.

The price must include the GST amount minus any rebates you are entitled to. Builder upgrades must also be added to the price including GST. Builder discounts or décor credits are subtracted from the total.

Some builders handle the GST rebate for you

Many builders will discount the purchase price upfront by the amount of the GST rebate and apply for the rebate on your behalf after closing. This can reduce the amount you need up front and keeps the paperwork simple.

Always confirm how your specific builder handles GST and rebates, as every builder is different.

5. Draw Schedules, Timelines, and Requalification Risk

If you are using a Progress Draw mortgage, timelines matter.

The first draw must occur within six months of mortgage approval. The final draw must occur within twelve months of the first draw. Each draw requires an inspection confirming the work completed to that point.

If the build is delayed and the final draw cannot occur within this window, you may be required to requalify. Requalification means new income documents, a refreshed credit check, and a new rate. Approval is not guaranteed, so choosing a builder with a reliable delivery timeline is important.

6. Appraisals and Inspections

All new build mortgages require a full appraisal. The appraiser uses the land value, plans, and specifications to determine the “as-complete” value.

During construction, the lender or insurer may require inspections at each draw stage. Some insured programs cover up to four inspections, while lender-managed programs usually require the borrower to pay for inspection fees directly.

7. Title and Occupancy Rules

A few important points to keep in mind:

Title to the land must be in your name before or at the time of the first advance. New build financing is available for one to four unit properties, but at least one unit must be owner-occupied. A specific advance may be used to fund the land purchase before construction begins.

8. Energy Efficiency Incentives

Some insurers offer premium refunds for homes that meet high energy efficiency standards.

If the home meets certain certifications or uses at least 20 percent less energy than a typical new home, you may be eligible for a partial insurance premium refund. This is worth asking about if your builder offers energy-efficient upgrades.

Final Thoughts

Financing a new build can feel more detailed than buying a resale property, but once you understand the steps, it becomes much easier to navigate. The key is knowing which mortgage type fits your situation, how timelines affect approval, and how GST, upgrades, and lending value factor into your mortgage.

If you are planning to buy a new build or want to explore which mortgage option fits your goals, I’m here to walk you through the entire process and make it as smooth as possible.