Mortgage solutions
Construction and New-Build Mortgages in Niagara
Whether you are closing on a builder's townhouse in Thorold or building a custom home on a lot in Fenwick, a new-build mortgage works differently from a resale purchase. Here are the draw schedules, appraisal risks and rebates that matter.
Reviewed November 13, 2026 · Indicative figures, OAC
- Insured amortization on new homes
- 30 years
- Minimum down on $650,000
- $40,000
- Construction Act holdback
- 10%
- Rate hold (lender-dependent)
- up to 120 days
Two very different ways to finance a new home
Niagara has two kinds of new-home buyers. The first buys from a builder: a freehold townhouse in Thorold's Rolling Meadows, a detached home in a Welland subdivision near the canal, a condo in Grimsby, a semi in Smithville. The builder carries the construction financing, you pay deposits, and you need a completion mortgage (often called a takeout) on closing day, which may be months or years after you signed.
The second builds their own: a custom home on a lot in East Fonthill or Fenwick, a rebuild on a tear-down in St. Catharines, or a country home on an acreage in West Lincoln or Wainfleet. Here you own the land and hire the builder, and you need a progress-draw construction mortgage that releases money in stages as the house goes up.
Buying from a builder: completion mortgages
30-year insured amortization
Since December 15, 2024, buyers of newly built homes can take a 30-year insured amortization with less than 20% down, even if they have owned before. The insurance premium carries a 0.20% surcharge for the longer amortization. Combined with the insured price cap of $1.5 million, that opens most Niagara new-build product to buyers with 5% to 10% down.
Worked example: $650,000 new townhouse in Thorold
| New build, 30 years | Resale, repeat buyer, 25 years | |
|---|---|---|
| Minimum down ($25,000 + 10% of $150,000) | $40,000 | $40,000 |
| Base loan (93.8% of price) | $610,000 | $610,000 |
| Insurance premium | 4.20% = $25,620 | 4.00% = $24,400 |
| 8% PST on premium, cash at closing | $2,049.60 | $1,952 |
| Total mortgage | $635,620 | $634,400 |
| Monthly payment | $3,127.67 | $3,437.55 |
The 30-year option lowers the payment by about $310 a month, which also makes it easier to pass the stress test at 6.29%. Ontario land transfer tax on $650,000 is $9,475, before any first-time buyer refund.
The appraisal gap on pre-construction contracts
Many Niagara buyers signed pre-construction agreements in 2021 and 2022, when prices peaked. Lenders lend on the lower of the purchase price and the appraised value at closing, so if the home appraises for less than you agreed to pay, you cover the difference in cash.
Worked example: Thorold contract at $720,000 appraises at $650,000
A buyer signed for $720,000 in 2022 and paid $72,000 in deposits. At closing the home appraises at $650,000.
| Mortgage type | Maximum loan | Total down needed | Cash beyond the $72,000 deposit |
|---|---|---|---|
| Conventional, 80% of $650,000 | $520,000 | $200,000 | $128,000 |
| Insured, $650,000 less $40,000 minimum down | $610,000 | $110,000 | $38,000 |
Land transfer tax is still charged on the $720,000 price: $10,875. Moving from conventional to insured financing, if the buyer qualifies and will live in the home, cuts the shortfall by $90,000. Other options include a builder credit or extension, a B-lender, or a short private second. Every option is covered in pre-construction appraisal shortfalls.
Other completion details
- Rate holds. Most lenders hold a rate for up to 120 days, depending on the lender, and some builder-specific programs hold longer. Apply about four months before your firm closing date.
- Condo interim occupancy. On a new condo you may move in months before the building registers, paying an occupancy fee rather than a mortgage. Budget for both periods.
- HST rebates. First-time buyers of new homes may qualify for the federal GST rebate (up to $50,000 on homes up to $1 million, phased out to $1.5 million) and Ontario's matching rebate of the provincial part of HST (up to $80,000 on homes up to $1 million). Confirm eligibility and timing with your real estate lawyer.
- Closing adjustments. New-build statements often add development charges, Tarion enrolment and utility connection fees. Ask your lawyer to review the agreement early, and run all-in costs in the closing cost calculator.
Building your own: progress-draw mortgages
With a custom build, the lender advances money in stages, called draws, after an inspector or appraiser confirms each stage is complete. You pay interest only on what has been advanced. Many construction lenders cap the loan at around 75% of the appraised as-complete value, and they expect your own money (usually the land equity plus cash) to go in first.
Worked example: custom home on a Fenwick lot in Pelham
A couple bought a lot in Fenwick for $325,000 and still owe $150,000 on a lot loan. Their builder quotes $650,000 to build. The appraiser values the finished home at $1,025,000. At 75% of that value, the construction mortgage is $768,750. The total to fund is the $150,000 lot loan plus the $650,000 build, or $800,000, so the couple put in $31,250 of their own cash first. Interest is charged at an illustrative 5.70% (prime + 1.00%) on the amount advanced.
| Stage | Cost of stage | Cumulative advance | Monthly interest-only | Months at this level | Interest for the stage |
|---|---|---|---|---|---|
| Lot loan payout and foundation | $247,500 | $216,250 | $1,027.19 | 2 | $2,054 |
| Framing, roof and windows | $162,500 | $378,750 | $1,799.06 | 2 | $3,598 |
| Plumbing, electrical and HVAC rough-ins | $130,000 | $508,750 | $2,416.56 | 2 | $4,833 |
| Drywall, finishes and cabinets | $162,500 | $671,250 | $3,188.44 | 3 | $9,565 |
| Completion and occupancy | $97,500 | $768,750 | $3,651.56 | 1 | $3,652 |
Interest during the build totals about $23,700. Budget it in advance, along with rent or carrying costs on your current home. Once complete, the $768,750 converts to a regular mortgage. At the uninsured five-year fixed rate of 4.54% over 30 years, the payment is $3,894.07 a month, plus about $1,033.54 in property tax at Pelham's approximate 1.21% rate.
What lenders want before the first draw
- Plans, permits and a fixed-price contract. Stamped drawings, a building permit from the municipality and a detailed cost breakdown. Cost-plus contracts are harder to finance.
- A builder the lender accepts. Tarion registration for the builder where required, proof of insurance and a track record. Owner-builders face stricter terms.
- An as-complete appraisal. Based on the plans and the location. A large custom home on a rural road may appraise below cost.
- Builder's risk insurance and a survey. In place before ground breaks.
- Rural services. Septic permits, well or cistern approvals and, on escarpment land, a Niagara Escarpment Commission development permit where it applies. See rural properties and hobby farm and NEC properties.
Where construction financing comes from
| Lender type | Typical use | Pricing | Notes |
|---|---|---|---|
| Big banks and some monolines | Completion mortgages; some progress draws | A-lender rates | Insured draw programs exist for owner-occupied homes |
| Ontario credit unions | Custom builds, rural lots | Credit union tier, often prime-based in the build | Often the most flexible with local builders |
| Alternative lenders | Appraisal gaps, self-employed builders | 5.49%–6.99% | Shorter terms, fees disclosed |
| Private lenders | Finishing a stalled build, bridge to completion | 8.99%–12.99% plus fees | Short-term only; see private mortgages |
See also Pelham and Fonthill, Thorold, Welland and Grimsby for local new-build markets, and the first-time buyer guide if this is your first home.
Frequently asked questions
Can I get a 30-year mortgage on a new build in Ontario?
Yes. Since December 15, 2024, buyers of newly built homes can take a 30-year insured amortization with less than 20% down, whether or not they are first-time buyers. The insurance premium carries a 0.20% surcharge. With 20% or more down, most lenders offer 30 years on any home.
What happens if my pre-construction home appraises low?
The lender lends on the lower of the price and the appraised value, so you cover the difference in cash. On a $720,000 contract appraising at $650,000, a conventional loan leaves a $128,000 gap beyond a $72,000 deposit, while an insured loan reduces it to $38,000. Builder credits, B-lenders and short private loans are other options.
How do construction draw mortgages work?
The lender releases money in stages, such as foundation, framing, rough-ins, finishes and completion, after an inspector confirms each stage. You pay interest only on what has been advanced. Your own equity usually goes in first, and the loan converts to a regular mortgage when the home is finished.
How much can I borrow to build a custom home?
Many construction lenders cap the loan at around 75% of the appraised as-complete value, though some insured and credit union programs go higher for owner-occupied homes. On a home appraised at $1,025,000 when finished, 75% is $768,750, and land equity plus cash must cover the rest.
Do first-time buyers get a rebate on new homes in Ontario?
First-time buyers of new homes may qualify for the federal GST rebate of up to $50,000 on homes up to $1 million, phased out to $1.5 million, and Ontario's matching rebate of the provincial HST portion of up to $80,000 on homes up to $1 million. Confirm eligibility and timing with your real estate lawyer.
Pre-approval & rate review
Get your Niagara mortgage numbers checked
Tell us where you are buying or what you owe. We reply by email, usually within one business day, with options from across the lender tiers.
- A licensed advisor reviews your numbers against A-lenders, Ontario credit unions and alternative lenders.
- Rate holds of up to 120 days on purchases and renewals (lender-dependent).
- On prime files the lender pays the brokerage, so there is no fee to you; any fee on alternative or private files is disclosed in writing first.
- Nothing goes to a lender or credit bureau until you say so.
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