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Do you offer a building or construction mortgage?
TD Canada Trust offers financing to assist with the construction of a new home when a home is being built in stages and requires multiple advances of money over a period of time. (This is not to be confused with a "Builder Mortgage,” which is used to purchase a newly built home from a builder/developer when the house is finished, and the mortgage amount is provided in a lump sum at that time.) When considering construction financing, you will need to think about the following:
Who will be building/renovating the property? The builder/contractor and the property must be registered under the applicable provincial New Home Warranty programs. TD Canada Trust will require a builder with a satisfactory record, and he or she must provide a fixed price for the completed project. If a contractor (or you as the owner) is planning to construct the house, you will need to consider the contractor's ability to complete the project and any work you yourself may intend to undertake on your own.
How long will it take to construct the property? The maximum construction period is one year from the date of application for the mortgage.
What will it cost? You need to have an idea of the total cost of construction. This estimate must include the land, building costs, site preparation including municipal services and finishing, and “soft costs” – non-building costs such as interest, required permits, real estate/solicitor fees, etc. In many cases, unexpected costs may arise or you may wish to add upgrades, so you'll need to make provision for those as well. It is recommended that you set aside an additional 15% of the estimated costs to cover unexpected overruns.
How much equity (down payment) do you have available? From what sources? The minimum down payment required depends on the appraised value or cost to construct (whichever is less) and whether or not the mortgage will be conventional or insured. It must be available at the time of application and you will be required to have additional resources available for cost overruns.
When and how will the money be made available? Construction financing is advanced in parts (called “draws”) throughout construction via your solicitor. A maximum of three (3) interim draws will be permitted and are usually advanced when construction is approximately 35%, 65% and 97% complete. Each time a draw is requested, the construction work completed thus far must be inspected by an appraiser to confirm what stage the construction is at.
- What documentation is required in order to apply? You should bring the following to your branch:
- Construction contract including costs
- Construction plans or blueprint of the home
- If self-building, all quotes for labour and material
- Site preparations including municipal services for the lot
- For the land, a copy of the deed as evidence of owners and/or a copy of the purchase and sale agreement
- Confirmation of required funds to bring construction to 35% completion stage
- Confirmation of income/employment
Note: Other documents may be required. Please contact your branch for further information regarding eligible properties, acceptable sources of down payment, available products and applicable interest rates. You can visit your local TD Canada Trust branch for assistance with this mortgage.
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Please note that the answers to the questions are for information purposes only for the products discussed. Individual circumstances may vary. In case of discrepancy, the documentation prevails.