New Construction Mortgages: Builder Deposits and Timing

Financing a Home That Isn't Built Yet

Buying new construction — whether a pre-construction condo or a home you are building — works differently from buying a resale property. The money does not all change hands on one closing day, the deposits are structured in stages, and your financing has to bridge a timeline that can stretch well over a year. Understanding how the pieces fit prevents expensive surprises.

Builder Deposits: Paid in Stages

With a pre-construction purchase, you do not pay the full price up front. Instead the builder collects a series of deposits on a schedule set out in your purchase agreement — for example, an amount on signing, then further installments at fixed intervals or as construction reaches certain milestones. Together these commonly add up to a significant share of the purchase price before you ever take possession.

These deposits are your own funds, or a gift, not mortgage money — so plan your cash flow around the builder's schedule. In many provinces, deposits on new homes are protected by a new-home warranty program up to program limits, which is worth confirming for your specific build.

Two Ways New-Build Mortgages Are Structured

Completion (Draw-on-Closing) Mortgages

Most buyers of a builder-built home or condo use a completion mortgage. The full mortgage advances in one lump sum when the home is finished and you take possession — much like a resale purchase, just with a closing date set far in the future.

Progress-Draw (Construction) Mortgages

If you are building a home yourself or with a contractor, a progress-draw mortgage advances money in stages as construction reaches defined milestones — foundation, framing and lock-up, then completion. An appraiser typically inspects at each stage before the lender releases that draw, and you often pay interest only on the funds advanced so far.

The Rate-Hold Challenge

Because a new build can take many months, the timeline often outlasts a standard rate hold, which is commonly around 90 to 120 days. If your completion date is a year or more away, your quoted rate may not be guaranteed all the way to possession. Some lenders offer extended rate holds designed for new construction — a feature that can be worth more than a slightly lower headline rate. Ask specifically how long the rate is protected and what happens if the build runs late.

The Appraisal-on-Completion Risk

Here is the risk that catches buyers off guard: your lender approves financing based on the property's value, but the final appraisal happens close to completion, often long after you signed the purchase agreement. If the market softens and the appraised value comes in below your purchase price, the lender bases your mortgage on the lower figure, and you have to cover the shortfall in cash on top of your deposit. Building a financial cushion protects you against this gap.

Delays Are Normal — Plan for Them

Construction timelines slip and occupancy dates get pushed. Interim occupancy — common with condos, where you occupy and pay an occupancy fee before final closing — adds another layer. Keep your financing pre-approval current, stay in touch with your broker as dates move, and avoid major changes to your income or credit between signing and closing, since the lender re-verifies everything before funding.

A Checklist Before You Sign

• Confirm the full deposit schedule and how you will fund each installment
• Ask whether you need a completion or a progress-draw mortgage
• Pin down how long your rate is held and the cost of any extensions
• Budget a cushion in case the completion appraisal comes in low
• Keep your credit and income stable through the whole build

Talk to a Broker Early

New-construction financing rewards the buyers who line it up early. A RateStreet broker can match your build timeline to lenders with the longest rate holds and the right draw structure, and help you plan for the deposit and appraisal milestones long before they arrive. Start the conversation at RateStreet.ca.