Buying a New Build? Here's What You Need to Know About the Mortgage

Buying a brand-new home from a builder sounds simple on paper — you pick the floor plan, sign the contract, and wait for the keys. But the mortgage process for a new build is meaningfully different from buying a resale home, and a lot of buyers get caught off guard. I've helped many clients navigate new build mortgages in Alberta, and I want to make sure you know what to expect before you walk into that show home.

How New Build Financing Is Different

When you buy a resale home, the purchase happens relatively quickly — typically 30 to 90 days from your accepted offer to possession. With a new build, you're often looking at 6 to 18 months or more between signing the purchase agreement and actually moving in. That gap creates unique financing challenges.

The biggest issue: mortgage rates change. When you sign with a builder, you're committing to a purchase price today. But you won't be getting your mortgage until the home is actually built. If interest rates have risen significantly between signing and closing, your mortgage could be much more expensive than you planned.

The solution is a rate hold, and it's one of the most important things I discuss with every new build client.

Rate Holds and Extended Rate Locks

A standard mortgage pre-approval comes with a 90 to 120-day rate hold — meaning the lender locks in a rate for you for that period. For new builds with 12+ month closing timelines, this isn't nearly long enough.

Fortunately, some lenders offer extended rate holds of 6, 9, or even 12 months specifically for new build purchases. These aren't always the lowest rate available, but they provide crucial certainty. If rates go up, you're protected. If rates come down, many lenders offer "float down" options that let you take the lower rate before closing.

Some builders also have preferred lenders they work with who offer extended rate programs or incentives. I always recommend getting your own independent mortgage advice before accepting the builder's financing, even if they're offering cash incentives to use their lender. Sometimes the incentive looks great upfront but costs you more over the life of the mortgage.

30-Year Amortizations for New Builds

One significant change that came into effect December 15, 2024: all buyers of newly-constructed homes — not just first-time buyers — can now access 30-year amortizations on insured mortgages. Previously, insured mortgages were capped at 25 years. The extended amortization lowers your monthly payment, which can help you qualify for a slightly larger mortgage or simply reduce financial pressure in the early years. Just be aware that a longer amortization means more total interest paid over the life of the loan.

The Deposit Structure on New Builds

Builder deposits work differently from a standard home purchase. When you sign a purchase agreement for a new build, you'll typically pay a deposit — often 5 to 20% of the purchase price — in stages:

For example, a builder might collect 5% upfront on signing, another 5% at a certain construction milestone, and the remaining deposit balance before or at closing. The specific structure varies by builder and development, so read your purchase agreement carefully.

This deposit is held in trust by the builder until closing. It's part of your down payment, but it's committed and not easily retrievable if you change your mind — which brings me to an important point.

Assignment Sales and the Right to Walk Away

Life changes. A job transfer, a growing family, a relationship change — sometimes things happen between signing and moving in. With a new build, your ability to exit the purchase depends entirely on your purchase agreement. Some builders allow assignment sales (where you sell your purchase agreement to another buyer before closing), while others restrict or prohibit this.

I always tell new build buyers: read the assignment clause before you sign anything. If you can't assign and you need to exit, you may forfeit your deposit. That's real money at stake, and it's worth understanding upfront.

GST and Closing Costs on New Builds

New builds come with costs that resale properties don't. The biggest one: GST. In Alberta, new homes are subject to 5% GST. On a $600,000 home, that's $30,000 in GST. Under the standard federal new housing rebate, the full rebate applies to homes with a fair market value up to $350,000, with a partial rebate for homes between $350,000 and $450,000, and no general rebate above $450,000. However, if you are a first-time buyer and your purchase agreement is signed after May 26, 2025, a new federal GST rebate for first-time buyers eliminates the GST entirely on newly built homes up to $1 million, with a partial rebate up to $1.5 million. Most builders require you to pay applicable GST at closing rather than rolling it into your mortgage.

Other closing costs to budget for on a new build: developer fees, utilities hookups, landscaping (often not included in the purchase price), window coverings, and sometimes the driveway. I've seen buyers shocked to discover that their "turnkey" new home requires $15,000 in finishing items not covered in the base price. Always ask the builder exactly what's included and what isn't.

New Build Appraisals: A Potential Catch

Lenders require an appraisal on new builds just like any other property. The challenge is that the appraisal is done when the home is complete — which may be significantly later than when you signed the purchase agreement. If the market has declined in the intervening period, the appraisal might come in below the purchase price.

When this happens, the lender will only advance a mortgage based on the appraised value, not the contract price. The gap becomes something you need to cover with additional cash at closing. This can catch buyers off guard, especially if the market softened during a long construction timeline.

This risk is manageable with proper planning. I discuss it with every new build client and make sure they have a financial buffer for this scenario.

Working With a Broker vs. the Builder's Lender

Builders often have financing partners who they steer buyers toward, sometimes with incentives like free upgrades or reduced deposit requirements if you use their lender. These deals can be legitimate and sometimes excellent — but they're not always the best option for you.

When you work with an independent broker like me, I can compare the builder's offering against the full market. Sometimes the builder's rate is genuinely competitive. Sometimes the "free upgrades" cost you $20,000 in higher interest over five years. Let me run the analysis before you decide — it takes 30 minutes and could save you a lot of money.

Ready to Buy New?

New builds are exciting. There's something genuinely thrilling about choosing your finishes, watching the home go up, and walking into a brand-new space that's truly yours. I love helping clients make this happen — with the right financing structure from day one so there are no surprises at closing.

If you're considering a new build, let's talk before you sign anything. I'll help you understand the rate hold options, the GST implications, the closing cost picture, and how to protect yourself throughout the construction period.