Owning your own home is a common dream for many people across the country.

Millions of Canadians work towards this lofty goal over the course of their lives and careers, often using banks or large financial institutions to secure a traditional mortgage. This is a familiar story. Once the interest rate and conditions are set, homeowners pay off their mortgage on a regular schedule, slowly building equity until they own the home outright.

There are, however, many aspiring homeowners who have a different dream. Instead of simply purchasing a house, some people dream of building one themselves! After all, it’s an exciting proposition. If you could, why not design and build your home exactly the way you want it?

For those that are interested in building their dream home, read on to learn a little bit more about how new construction loans work. When it comes to construction loans, Ontario and Toronto residents have discovered that Tribecca Finance is a great place to get the funds they need.

What is a Construction Loan?

First, it’s important to go over some of the basics.

One of the defining characteristics of a construction loan is that it is designed as a short term tool. Construction loans are typically used to build a residential property. However, these loans can also be used to buy the land upon which the new home is built, pay contractors, purchase building materials, and pay for any necessary permits.

To be approved for a new construction loan, the process involves creating building plans, as well as knowing your construction budget.

Once the loan is finalized, the funds are advanced in stages throughout the construction process. One of the benefits of a construction loan is that the interest payments paid by the borrower are only paid on the funds released at each stage, meaning the interest payments are lower than if the entire sum had been given up front.

Happy Family New House

When Does a New Construction Loan End?

Usually completed within a year, a construction loan will come to its natural end when the construction is completed. At that point, there are a few different ways to proceed.

In most cases, homeowners opt to get a traditional mortgage to pay off the construction loan.

If the property is being built with the intention to sell, many builders decide to keep the construction loan until the home is sold.

Can a Construction Loan Be Used for Renovations?

Yes. If you already have a mortgage and are interested in renovating or expanding the current footprint of your home, a construction loan could be the home construction solution you're looking for.
Interior Design House Renovation

And renovations don’t just upgrade the look and feel of your home, they can also add value to the home for later resale. Items like putting in a pool, upgraded kitchens and bathrooms, or a finished basement are good examples of this.

At the same time, the decision about whether or not to take out a construction loan will depend on the size (and cost) of the renovations you’re envisioning. If all you need is $20,000 or $30,000 dollars to complete your renovation project, a Tribecca home equity loan is a better option.

Should I Get a New Construction Loan?

Good question!

One of the most important things you can do when answering these questions for yourself is to find a source of good advice. It is always advisable to try to benefit from the experience of others whenever you can.

A good place to start would be to speak to a contractor you trust and determine the cost details and potential building timeline.

Another source of good advice can come from trustworthy lenders or financial experts. Every lender is different, and some are more flexible than others. At Tribecca Finance, our construction loan specialists will be pleased to answer your questions with no obligation.

Tribecca Finance Can Help

When it comes to construction loans, Toronto residents have turned to Tribecca for decades. We are experts in construction mortgage lending and have helped thousands of homeowners over the years.

The advice we provide comes from years of experience, and there’s no better choice in terms of personalized service and flexible repayment options. To learn more about our loan products or to find out how Tribecca Finance can help you build your dream home, contact us today!