How To: Build your own Home

Understanding Construction Mortgages

Before getting into all the details, let's get into what a construction mortgage is and what you need to do before the shovels hit the dirt!

What is a construction mortgage?

A construction mortgage, in the simplest terms, is a borrowed loan used to finance different stages prior to and during the construction of your property.

The entire loan is separated into several stages. The money is being placed into the following developments:

  • Foundation
  • Roofing
  • Plumbing
  • Constructing exterior and interior supports
  • Installing cupboards, shelving, doors, etc.
  • Building different rooms (kitchen, bathrooms, bedrooms, etc.)

FYI: Before your money is advanced to each stage, an inspector will be assigned to the property to ensure the construction builders are following the NHW (New Home Warranty) standards.

What are the costs?

There are many different areas that will require funding since you're building a property from the ground up. You will need to prioritize the basics and go from there. Let's see what your initial costs will be.

1. Owning Your Land

To lock down funding, you will need to purchase and officially own the land using an advance. If you own the land already, that advance may be used as equity.

Owning the area is one of the first important costs to complete in order for your financial institution to secure that a "real mortgage" exists on the property.

2. Initializing Ground Funding

Depending on the project, it is expected that the Homeowner finances the first 20% of the construction plan without an advance. This money is directly out of the pocket. With this money in place, the construction project can commence.

3. Requiring Services

Now as an official landowner, you have more responsibility than ever! You will have to make sure you have the necessities. This includes:

  • Water Services
  • Sewer Services
  • Gas Services
  • Septic Services

4. Out-Of-Pocket Costs

During the construction phase, you may be hit with different kinds of fees due to building plans, selling plans, location of the property or permits. These are:

  • Realtor Costs
  • Inspection Costs
  • Property Taxes
  • Construction/Architect Costs

5. Interest

The Homeowner still has to pay interest until the regular principal and interest payments start to come in.

6. Lien Holdbacks

Depending on your financial institution, your mortgage lender's policy and also the province you live in, lien holdbacks are important to consider.

If a building contractor/supplier claim a lien on your property, you will need to regroup and secure payments just in case there are unpaid costs that were not fulfilled during the initial construction process.

You or your solicitor/business manager may be required to hold back some of the money that is used during the different stages of construction. Below is a chart explaining the different percentages between the provinces. 

Province Holdbacks

Province Percentage (%)
British Columbia 10
Alberta 10
Saskatchewan 10
Manitoba 7.5
Ontario 10
Quebec 15
Newfoundland 10
New Brunswick 20
Nova Scotia 10
Prince Edward Island 20


All lien holdbacks will be released to you between 30-60 days – depending on where you live in Canada – after your property has been completed. This is ONLY if no lien claims have been made against your purchase. 

Important tip to remember! 

– After your mortgage is finalized, you will not able to change your mortgage amount to accommodate any upgrades made to the Home!


Of course there is a lot more information that you will need to know in order to build your property from the ground up. Instead of reading a bunch of complicated terms – email, call or text HomeHow and we will answer any questions or concerns you may have about building your dream Home! 

HomeHow Mortgage.