A progress draw mortgage is perfect if you’re thinking about building your dream home. Typically this is an 18 month process with construction to be completed within 15 months of the first advance.
With a progress draw mortgage funds are advanced in intervals at various milestones along the construction process, which is why a progress draw mortgage is sometimes referred to as construction financing. Depending on the lender, there are generally 3 – 4 draws at predetermined construction milestones – foundation, lock up, drywall, and completion.
At each interval an appraiser is required to submit a report confirming the completion of a stage before the next batch of funds are released. Interest-only payments are charged through the various construction stages, and once the house has been completed and the full amount of the mortgage advanced, you renew into a fixed rate mortgage or variable rate mortgage without penalty.
If you are prepared to dig in your heels and work through all of the details involved with building a new home, then a progress draw mortgage may be just what you are looking for.
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