New Build & Construction Mortgage in Medicine Hat, Alberta
Building a new home comes with a different kind of mortgage. I'll make sure your construction financing is set up correctly from the first draw to the final closing.
Financing a New Build Is Different — Here's What You Need to Know
Building a brand new home is exciting. It's also one of the more complex mortgage scenarios out there — and one where having the right broker in your corner from the very beginning makes a significant difference.
A new build mortgage works differently than a standard purchase mortgage. The financing is structured around the construction process itself, not just the finished home. Getting this set up correctly from the start protects you, your investment, and your timeline.
The Two Types of New Build Mortgages
This is a common scenario in Medicine Hat — you purchase a home from a builder before or during construction, and the builder handles the build. You sign a purchase contract, pay a deposit, and your mortgage funds when the home is complete and ready for possession.
With a completion mortgage, the mortgage process is similar to a standard home purchase, but there are some important differences around the approval process, rate holds, deposit structures, change orders, and the gap between when you sign and when you actually take possession. I'll walk you through your contract so you know exactly what you're agreeing to and the pros/cons of a completion mortgage.
Completion Mortgage
If you're hiring your own contractor to build on a lot you already own or the builder owns or land you are purchasing, you'll need a draw mortgage — also called a construction mortgage.
Rather than receiving the full mortgage amount upfront, funds are released in stages as construction milestones are reached. This is called a draw schedule, and it's tied directly to the progress of your build. As with a completion mortgage there are pros and cons to this structure. I can walk you through this so contact me early in the process!
Draw Mortgage
Important Things to Watch for With New Build Contracts
Builder contracts are written to protect the builder — not you. Before you sign, there are a few things worth understanding:
Some builder contracts include clauses that allow the price to increase due to rising material or labour costs. This can affect how much your mortgage needs to be. I'll help you understand what you've signed and whether your approval needs to be adjusted.
Price Escalation Clauses
Build timelines shift. Most builder contracts allow the builder to extend the closing date, sometimes by months. This can affect your rate hold and your financing. I factor this in when structuring your approval so you're not caught off guard.
Closing Date Extensions
New construction homes are subject to GST in Canada — this is often factored into the purchase price, but not always. Make sure you understand what's included in your contract price and how it affects your total costs and down payment.
GST on New Builds
In Alberta, new homes are covered under the New Home Buyer Protection Act, which provides warranty coverage on labour, materials, and major structural components. It's worth understanding what's covered and for how long.
New Home Warranty
How a Construction Draw Mortgage Works
A draw mortgage releases funds in stages — typically three to five draws over the course of the build. Here's what that generally looks like:
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Once the foundation is poured and inspected, the first draw is released. This covers the cost of the foundation and initial site work.
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When the structure is framed, the roof is on, and the windows and exterior doors are installed, the second draw is released. At this stage the home is "locked up" and protected from the elements.
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Plumbing, electrical, and HVAC rough-ins are complete and drywall is up. The third draw is released after an inspector confirms this stage is done.
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The home is finished, passed final inspection, and ready for occupancy. The final draw is released and your mortgage converts to a standard amortizing mortgage.
Between draws, you typically pay interest only on the funds that have been advanced — not the full mortgage amount. This keeps your carrying costs lower during construction.
Getting Pre-Approved Before You Sign Anything
This is the most important piece of advice I can give anyone building a new home: get your financing sorted before you sign a builder contract or purchase a lot.
Builder contracts are legally binding, often non-refundable, and can move faster than you expect. If your financing falls through after signing, the consequences can be serious. Getting pre-approved first means you know exactly what you qualify for, what your payments will look like, and that your financing is solid before you commit.
Down Payment Requirements for New Builds
Down payment rules for new builds follow the same structure as standard purchases:
5% minimum for homes under $500,000
5% on the first $500,000 and 10% on the amount over $500,000 for homes between $500,000 and $1,499,999
20% minimum for anything over $1.5 million
For construction mortgages specifically, lenders may require a larger down payment — typically 20% or more — depending on the lender and the project. I'll be upfront about what's required for your specific situation.
Frequently Asked Questions — New Build Mortgages
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Some lenders offer extended rate holds for new builds — up to 24 months in some cases. This protects you against rate increases during construction. Availability and terms vary by lender, and I'll find the best option for your timeline.
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Cost overruns are common in construction. If your build costs exceed the original estimate, you may need to cover the difference from your own funds — your mortgage is approved based on the original amount. This is why having a detailed budget and contingency built in from the start is so important.
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For draw mortgages, lenders typically require an inspector to sign off at each draw stage before funds are released. Even for builder purchases, a pre-possession inspection is strongly recommended — new doesn't automatically mean perfect.
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A progress inspection is a third-party review of construction at each draw stage to confirm work has been completed as described. The cost is typically paid by you as the borrower and is factored into your overall build budget.
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Yes — if you already own the lot, it can often be used as equity toward your down payment, which can reduce the amount of cash you need to bring in. I'll walk through how this works based on your specific situation.
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A new build mortgage finances construction of a new home from the ground up. A renovation mortgage (or refinance) allows you to access equity in an existing home to fund improvements. If you're doing a major addition or gut renovation, there may be a construction component involved — reach out and we'll figure out the right structure together.
Still have questions? Take a look at the FAQ or reach out anytime.
Choosing the Right Lender for a New Build
Not all lenders offer construction mortgages, and not all builder-purchase mortgage products are created equal. Rate holds, draw structures, inspection requirements, and conversion policies vary significantly between lenders.
With access to 40+ lenders, I'll find the one whose product fits your build timeline, your budget, and your long-term mortgage goals — including making sure the conversion to a permanent mortgage at the end of construction is as smooth as possible.
Building Your New Home in Medicine Hat? Let's Get the Financing Right.
The earlier we connect in the process, the better. Whether you're still in the planning stage or you've already been talking to builders, I can help you understand your options, get your financing in order, and make sure you're protected through every stage of the build.