You can borrow money to build a new home through a construction loan. Construction loans will only require interest payments while your home is being built, and it can be converted to a regular mortgage with principal repayment once construction is complete. Use the construction loan calculator below to find out how much a construction loan would cost.
|#1||Purchasing Land||0%||0 Months|
|#2||Windows and Doors Installed||35%||4.2 Months|
|#3||Plumbing,Wiring, and Drywall||65%||7.8 Months|
|#4||Interior Finished||100%||12 Months|
Home construction loans allow you to borrow in set lump-sums that are based on the progress of your home’s construction, rather than borrowing the entire cost of construction upfront. The initial loan payments are for the money that you initially borrow to purchase the land. Over time, as construction progresses, you will be able to borrow more and more money to cover construction costs. This will increase the amount that you owe, in turn increasing the interest payments on the amount borrowed. Construction loans usually require only interest payments, with no principal repayments required until the end of your term.
The upfront down payment that is required for a construction loan is for the cost of purchasing the land that you will be building on. Most lenders will allow you to borrow between 65% and 75% of the cost of purchasing the land. That means that you will need to come up with another 25% to 35% to cover the land costs. Our construction loan down payment calculator assumes that a 35% down payment is required.
Most construction loan lenders will only allow you to borrow up to 75% of the total cost of construction. You will need to cover the remaining 25% of construction costs on your own, similar to a down payment. To find out more about construction loans, visit our construction loans page.
You can estimate your construction costs in the calculator using the size of the home that you are planning on building and the average construction cost per square foot for your area. You can find some average values for various Canadian cities below, or enter your own estimated total costs. Visit our How Much Does It Cost To Build A House page to find out more information on costs for construction, land, etc.
|Home Type||Production Single-Family Home (Stock Home Plans)|
|Vancouver||$145 - $260|
|Calgary||$125 - $185|
|Edmonton||$130 - $185|
|Winnipeg||$125 - $190|
|Toronto/GTA||$115 - $215|
|Ottawa/Gatineau||$120 - $195|
|Montreal||$105 - $180|
|Halifax||$90 - $150|
|St. John’s||$110 - $145|
|City||Average Home Size||Cost of Single-Family Home|
|Toronto||2,380||$273,700 - $511,700|
|Vancouver||1,900||$275,500 - $494,000|
|Halifax||1,530||$137,700 - $229,500|
Since the money that you borrow is spread out over your term, the total interest of a construction loan is based on when certain milestones are reached.
For example, your construction loan lender might allow you to borrow 35% of the total cost of construction once your home is 35% built, which is around when your foundation and roof is complete, with windows and doors installed. This first draw could take anywhere between three and six months. The earlier you reach the scheduled draws, the earlier you can borrow money. Borrowing money early will mean that you will be paying interest early, which will increase the total interest of your construction loan.
The construction loan calculator above assumes that you reach construction milestones proportionate to your construction loan term length. For example, if you entered a term length of one year, then your first draw would be at 35% of your term length, which is 4.2 months (35% of 12 months). This first draw would allow you to borrow 35% of the total cost of construction. The interest on this amount will accumulate for the rest of your term length, which would be 7.8 months of interest (12 months - 4.2 months).
Once the term is over, a construction loan can be transferred into a mortgage or repaid back in full. Some mortgage lenders offer construction mortgages, which may allow you to lock-in a mortgage rate for your future mortgage while your home is being built.