You have the perfect vision for your custom dream home, but now what about the financing? A specialty draw mortgage that protects your interests may be the perfect solution for your custom home build. Whether you are planning an acreage home or a home designed by a custom home builder in the city, a draw mortgage cannot only fund your build, but also help in financing your land purchase.
A draw mortgage is an arrangement with a mortgage lender that allows for a portion of mortgage funds to be advanced to the custom home builder at various stages of the construction process.
If you haven’t purchased your lot yet, no worries! You may even be able to use the initial draw advance to purchase your land, whether it is a city lot or acreage. Cornerstone Home has longstanding partnerships with key mortgage lenders that allow clients to make these sorts of flexible arrangements to include the initial draw advance to purchase the lot.
But how can you make sure that you and your funds are protected through the custom home building process? As your build progresses, draws will be advanced at pre-determined stages of construction. However, before any funds are released to the solicitors, an inspection must be performed first to insure that the required stage of construction is fully completed. Only once the lending institution is satisfied, will they allow funds to be distributed to the solicitor, and then to the custom home builder.
The draw schedule varies between institutions, but here is a typical schedule for the release of funds: the first draw is advanced when the home’s foundation is completed and when the home is ready for backfill. A qualified appraiser is sent out to inspect the home and provide progress pictures as proof. Once approved, approximately 15% of the project funds are then advanced to the lawyer and then to the custom home builder. The funds for the second draw will be released once the home is ready for drywall and HVAC is installed. The third draw will typically be advanced after drywall is complete with the fourth draw contingent upon the completion of the basement floor, flooring and door installation. Before each draw, inspectors always attend the job site to verify that the custom home builder has completed the work to the appropriate stage and that the builder is following the Alberta New Home Warranty policies.
Holdbacks are another key way the homeowner is protected with a draw mortgage. Mortgage funds that are released to the lawyers, will have a 10% builder’s lien holdback. This holdback works to protect the homeowner to ensure that no contractor liens are placed on the property during the construction phase. Once the deadline for contractor liens lapses, the final funds can be released to the custom home builder.
Cornerstone Homes has worked to establish key lenders that have a history of providing both excellent lending practices that protect the buyer and excellent rates for Cornerstone custom home clients.
Contact Cornerstone Homes today to find out more about all your financing options! Call Justin today at (403) 860-3574