Construction (Builder/Draw) Mortgages
- A construction mortgage allows you to draw down on the full amount of the mortgage at predetermined stages of the home construction. These types of mortgages are also called Draw Mortgages or Progress Draw mortgages. Construction mortgages are given on a progress advance or draws. Some builders however are completion builders, which means they do not require progress draws during the construction phase of your new home. Instead they require a larger deposit in the beginning and then the balance of the mortgage funds and downpayment upon completion of construction of the home.
- Construction mortgages are normally taken out by individuals, who borrow money from mortgage providers.
- Mortgage rates either come as fixed or variable rates. The difference between them is that variable rates can go up and down, while fixed rates are locked in for the term of your current mortgage contract.
- In addition to variable or fixed-rate mortgages, mortgages can be either closed or open terms. A closed mortgage term is best if you don’t plan on paying off your mortgage in full in the short term. If, however, you want to pay off the mortgage before the specified date, you’ll have to pay a penalty. By agreeing to keep your mortgage for the full term, you’ll receive a lower interest rate than in an open mortgage. With an open mortgage, you have the flexibility to pay off the mortgage at any time without a penalty.
- Mortgages are either Insured(High Ratio-less than 20% downpayment) or Conventional( more than 20% downpayment)
- First time home buyer, If you’re buying your first home, you may have access to a number of tax breaks. These include: First-Time Home Buyers' Tax Credit, The Home Buyer's Plan