Posted by: Daryl & Wendy Ashby | November 1, 2011

Ever Wondered How a Construction Loan Works?

Unlike a regular residential mortgage on a completed home where the lender funds all of the required money on the date of possession; a Construction Mortgage is given out in stages. There are typically 4 stages where funds can be advanced in a Construction Mortgage.

These stages are:

1. Foundation Complete – This stage is generally complete when the foundations are in place and the backfilling around the foundation has been completed. Usually, at this stage, the framing has started as well. If you can see that the once empty lot now contains what will be your poured basement, this stage is complete.

2. Lock-Up – This stage is generally complete when the framing is finished, the windows are in place, and the doors are installed. The electrical and plumbing have been roughed in and the property is ready for drywall. If you can walk through and peer out through the windows, stand in a framed bedroom, and open a door, this stage is complete.

3. Drywall Complete – This stage typically involves completing the drywall and having it ready for paint as well as finishing most of the electrical and plumbing. Typically the heating systems have also been installed and functioning. At this stage, you are likely looking at paint chips and imagining the design possibilities.

4. Home Complete – This final stage occurs once the construction on the home has been complete and everything has been inspected and the occupancy certificate has been issued. You have a key in hand, your boxes are packed, and you’re ready to move in!

A Construction Mortgage may also be required when completing a major renovation on an existing home. In this situation, a specific, individualized advance schedule will be determined between the lender and the consumer through their mortgage broker.


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