Quick answer: You don't need a mortgage when you sign for a pre-construction home, but you do need one at closing. That can be years later, and your lender will re-check your income, debts, credit and the home's appraised value then.
- Get pre-approved before you sign, so you know what you can afford.
- Plan your deposits from savings.
- Keep a cash buffer in case the home appraises below your purchase price.
- Since December 15, 2024, buyers of newly built homes can get 30-year amortizations on insured mortgages, and the insured mortgage cap is $1.5 million.
Part of our Pre-Construction Investing & Buying Guide.
Mortgage basics for pre-construction
Do I need a mortgage when I sign?
No. You pay deposits from your own funds during construction, and the mortgage is only needed at closing. However, most agreements ask for proof of financing (often a pre-approval letter) within about 30 days of signing. Get pre-approved first.
Does my pre-approval last until closing?
No. Pre-approvals and rate holds usually last 90–120 days. Some lenders offer longer rate holds on new construction, but terms vary. You'll apply for your actual mortgage closer to occupancy or closing, when your income, debts and the rates at that time will decide your approval.
What is the minimum down payment?
| Purchase price | Minimum down payment (owner-occupied) |
|---|---|
| Up to $500,000 | 5% |
| $500,000 – $1,499,999 | 5% on the first $500,000 + 10% on the rest |
| $1,500,000 or more | 20% (insured mortgages not available) |
For a rental property you won't live in, lenders usually require at least 20% down. Your total deposits often count toward your down payment.
Can I get a 30-year amortization on a new build?
Yes. Since December 15, 2024, insured mortgages can have 30-year amortizations for first-time buyers and for anyone buying a newly built home. Uninsured mortgages (20% or more down) are commonly available with 30-year amortizations from many lenders.
What is the stress test?
Federally regulated lenders qualify you at the higher of 5.25% or your contract rate plus 2%. You'll be stress-tested at closing, not when you sign.
Appraisals and the appraisal gap
What is an appraisal gap?
The difference between your purchase price and the home's appraised value at closing. Lenders lend based on the lower of the two. If your $650,000 condo appraises for $600,000, an 80% mortgage is $480,000, not $520,000. You'd need $40,000 more in cash.
What can I do if my home appraises low?
- Ask for a second appraisal, or try another lender
- Cover the gap from savings, family or other assets
- Ask the builder about a price adjustment, a vendor take-back mortgage, or switching to a smaller unit
- Assign the contract before closing, if allowed
- Speak to a lawyer before considering default, because the builder can sue for losses beyond your deposit
How common are appraisal gaps in 2026?
More common than in past years, especially for GTA condos bought near the 2022 peak. In one reported 2026 case, a buyer who paid about $650,000 for a one-bedroom saw it appraise at about $500,000. Freehold homes and recent purchases at lower prices are less exposed.
Paying deposits
Can I use my FHSA for a pre-construction deposit?
Often, yes. A qualifying FHSA withdrawal requires a written agreement to buy or build a qualifying home before October 1 of the year after the withdrawal, and you must intend to live in it. Because a signed pre-construction agreement can meet that test, the FHSA is often more flexible than the RRSP Home Buyers' Plan. Confirm with your financial institution.
Can I use the RRSP Home Buyers' Plan?
Possibly, but the timing is strict. The HBP generally requires you to buy or build the home by October 1 of the year after you withdraw. That can be hard to meet with a long construction timeline, so get advice before withdrawing.
Can I borrow my deposit?
Some buyers use a line of credit or home equity line. Lenders will count that debt when you qualify at closing, and many lenders want to see that your down payment isn't borrowed. Plan carefully.
Interest rates
What happens if interest rates rise before closing?
Your payment and qualifying rate will be based on rates at closing. A higher rate can reduce how much you qualify for. Leave room in your budget. As of July 2026, the Bank of Canada's policy rate was 2.25%.
Can I lock in a rate now?
Standard rate holds don't stretch years ahead. Some builders arrange preferred lender programs with extended rate holds or incentives. Compare those offers against the broader market.
Investors
Can I use rental income to qualify?
Many lenders will count a portion of expected rent, often based on an appraiser's rental estimate. The rules vary by lender.
Can I get a mortgage for an investment condo with less than 20% down?
Not usually for a non-owner-occupied unit. Mortgage default insurance generally requires you or a family member to live in the home.
How do I finance several pre-construction units?
Each one needs to be qualified at closing. If several close around the same time, your debt ratios rise quickly. Talk to a mortgage professional before signing for more than one.
More FAQs: Buying Process · Occupancy & Closing · Legal Questions
About the author: Ola Otubu is a REALTOR® with Realty ONE Group Reveal, Real Estate Brokerage, and the founder of Buyprecon.ca. He represents buyers of new construction homes and condos across Ontario, from the first deposit through PDI, closing and warranty claims.
This article is general information, not mortgage, financial or tax advice. Lending rules and rates change. Speak with a licensed mortgage professional before signing. Sources: Department of Finance Canada; OSFI; Bank of Canada; Canada Revenue Agency.
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