With most home purchases, you get pre-approved, find a home and close within a few months. Pre-construction stretches that timeline over years. Your mortgage won’t fund until closing, and the lender will judge your income, the property value and interest rates at that point. Here’s how to plan ahead.
Step 1: Get a pre-qualification before you sign
Before you visit sales centres, talk to a lender or mortgage broker. A pre-qualification or pre-approval shows roughly how much you can borrow and what down payment you’ll need. Standard pre-approvals usually hold a rate for 90 to 120 days, so they won’t last until closing, but they confirm your budget is realistic.
Some builders ask for proof of financing, or work with lenders who offer pre-construction programs, sometimes with longer rate holds or incentives. Compare those offers with independent lenders.
Step 2: Understand the stress test
Federally regulated lenders qualify you at a higher rate than your actual rate: the greater of your contract rate plus 2% or the minimum qualifying rate. Whatever you qualify for today, assume you’ll need to qualify again at closing, possibly at a different rate.
Step 3: Know the rules for new builds
- 30-year amortization: since December 15, 2024, insured mortgages (less than 20% down) can have a 30-year amortization for first-time buyers and for all buyers of newly built homes. Longer amortization lowers your monthly payment.
- Insured mortgage cap: homes up to $1.5 million can qualify for insured mortgages with less than 20% down.
- Minimum down payment: 5% on the first $500,000 and 10% on the portion above, for insured mortgages. Investors usually need 20% or more.
Your deposits paid to the builder count toward your down payment.
Step 4: Plan for the appraisal
Close to final closing, your lender will appraise the home. If it comes in below your purchase price, the lender will lend based on the lower value, and you’ll have to make up the difference in cash. This is the biggest financing risk in pre-construction, especially in markets where prices have softened. Build a cash buffer.
Step 5: Keep your finances steady
- Avoid taking on large new debts, like car loans, before closing.
- Keep your employment stable if you can; a job change near closing can complicate approval.
- Keep records of where your deposit money came from.
Step 6: Apply for your mortgage commitment
About four to six months before final closing (or as advised by your lender), apply for your mortgage commitment. For condos, remember there are two stages: you pay occupancy fees during interim occupancy, and the mortgage funds at final closing. See occupancy vs final closing.
Cash you’ll need at closing
Besides your down payment, set aside money for closing costs such as land transfer tax, legal fees, development charge adjustments and, in Ontario, provincial sales tax on any mortgage insurance premium. Check whether you qualify for GST/HST rebates, which can lower your costs.
What if you can’t get a mortgage at closing?
Talk to the builder and your lawyer early. Options may include an alternative or private lender, a co-signer, a builder-arranged mortgage, or an assignment sale. Failing to close can mean losing your deposits and facing a claim for damages.
Checklist
- Pre-qualify before you sign
- Choose a deposit schedule you can afford (see deposit structures)
- Keep a cash buffer for appraisal gaps and closing costs
- Re-check your approval each year before closing
- Apply for your commitment months ahead of final closing
Next, read the first-time buyer’s guide or browse projects in Brampton, Milton or Whitby.
Frequently asked questions
Can I lock in a rate for a pre-construction home?
Standard rate holds rarely last until closing. Some lenders and builder programs offer longer holds; compare the terms carefully.
Do I need a mortgage for the deposits?
No. Deposits are paid from your own funds. The mortgage covers the balance at closing.
General information only. Mortgage rules change; confirm current requirements with a licensed mortgage professional.
