A Buyer’s Guide to New Construction Mortgages in Edmonton
A Buyer’s Guide to New Construction Mortgages in Edmonton
There’s nothing quite like the excitement of a brand-new home, built just for you. But financing a new construction home is a slightly different process than buying a resale property. The main difference is the timeline—it can be many months, sometimes over a year, between signing the contract with your builder and your actual possession day.
This guide will explain the two main types of mortgages for new builds in Edmonton so you can navigate the process with clarity.
The Two Types of New Construction Mortgages
1. Completion Mortgage (Most Common)
This is the simplest and most common type of financing for new homes purchased from a production builder in a new community. The process is straightforward:
- You get a mortgage pre-approval to confirm your budget.
- You sign the purchase contract with the builder and provide them with a series of deposits throughout the build process.
- Your full mortgage funding doesn’t happen until the home is complete and you are ready to take possession.
You are not making mortgage payments during the construction period, only the deposits required by the builder.
2. Progress Draw Mortgage
This type of mortgage is more common for custom-built homes where you already own the land. With a progress draw mortgage, the lender advances the mortgage funds to you (or your builder) in stages or “draws” as the construction reaches certain milestones.
For example, you might receive funds after the foundation is poured, once the house is framed, at “lock-up” (when windows and doors are in), and upon completion. This is a more complex process that requires close coordination between you, your builder, and your lender.
Key Things Every New Build Buyer Must Know
Rate Holds are Crucial
Because of the long timeline, getting a long-term rate hold from your mortgage broker is essential. Many lenders can lock in an interest rate for you for up to 12 months. This protects you from the risk of interest rates rising while your home is being built.
Your Financial Picture Must Remain Stable
This is critical. The lender will re-verify your income, credit, and employment just before your possession day to finalize the mortgage. It is crucial that you do not make any major financial changes during the build. Avoid changing jobs, financing a new car, or taking on any other significant debt, as this could jeopardize your final mortgage approval.
The Strategic Link-Up
Financing is a key step when buying a new home. For a list of the best new communities, see our Guide to Edmonton’s Best New Construction Communities →
To see how this fits into the overall mortgage process, review our Ultimate Guide to Getting a Mortgage in Edmonton →
How Does It Affect Your Affordability?
The primary impact of the stress test is that it reduces a buyer’s maximum purchasing power. It forces a “what if” buffer into the calculation, meaning the amount you are approved for is based on your ability to handle higher rates, not just the low rates of today.
Does Everyone Have to Pass It?
The stress test applies to almost all new mortgages from federally regulated lenders (which includes all of Canada’s major banks), regardless of the down payment size. Some provincially regulated lenders, like credit unions, may have slightly different qualifying criteria, which is another reason why working with a knowledgeable mortgage broker is so important.
The Strategic Link-Up
The stress test is a key factor in determining your budget. To see how it fits into the overall process, review our Ultimate Guide to Getting a Mortgage in Edmonton →
Ready to Get Expert Advice?
The best way to navigate the mortgage process is with an expert on your side. We work with Edmonton’s top mortgage brokers who can provide a free, no-obligation consultation to assess your situation and find the best possible rate for you.
Let us connect you and get your questions answered by a professional.
MoveFaster is partnered with The Unified Group (Invis Mortgage Intelligence) to bring you up-to-date mortgage information.
Let’s Build Your Winning Strategy
This guide has given you the knowledge. Now, let’s turn that knowledge into a successful home purchase. As your Edmonton real estate advisor, my job is to provide the hyper-local data and expert advice needed to secure the right home at the right price.
