Construction Loans

How do construction loans work?

A construction loan is a short-term loan that is paid in portions (draws) to your builder over the course of 12 to 18 months. While your home is being built, you are responsible for paying the interest on the amount that the builder has drawn on the loan. Once the home has been finished, the construction loan will be converted or changed into a permanent loan. This is also known as a “construction to permanent loan”.

Are construction loan rates different?

Interest rates depend on your creditworthiness, the amount of money you need to borrow, type of loan, among other things. Remember, a construction loan is a short-term loan where you only pay the interest on the loan during construction. When the construction is completed, you will then transition to permanent financing.

Does the construction loan include the cost of the land?

If you need to buy the land, your construction loan may include its cost. It’s important to know that whether you are purchasing land or already own the land, you can receive credit for land equity.

I currently own a condo unit and would like to renovate my condo does this qualify for a construction loan?

To renovate your condo, you’ll want to apply for a renovation loan. Construction loans are for building single family homes being used as a primary residence or second home.

How long does my builder have to complete my new home?

Depending on the type of loan and construction method, your home will need to be built within either a 12-month or 18-month term.