Len Lane sits down with Leslie Kearns, a Broker Experience Specialist from Alberta Treasury Branch (ATB), to unpack the complexities of mortgage solutions for home construction. Whether you’re building on a lot you already own or working with a builder, this conversation covers the key financing options available—from draw mortgages to completion mortgages. Leslie outlines the requirements for fixed-price contracts, the four draw stages in construction financing, and what clients should know about additional costs and new home warranties.

The episode also dives into modular and self-built homes, highlighting what lenders require when clients take on these types of projects. Leslie and Len discuss common challenges such as utility setup, delivery costs, and the need for private lenders in certain scenarios. Throughout the conversation, they emphasize the importance of proper planning, having sufficient equity and cash flow, and engaging experienced professionals to navigate the build. Whether you’re just considering a custom home or already own land, this episode is packed with insights to help you move forward with confidence.

About

Leslie Kearns is a broker experience specialist with Alberta Treasury Branch (ATB).

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Contact Len Lane | Brokers for Life: 

• BrokersForLife.ca
• LinkedIn: Len Lane
• LinkedIn: Brokers for Life
• Facebook: Brokers for Life
• X: @Brokers4Life
  

Contact Leslie Kearns: 

• Website: atb.com 
  

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Transcript
Len  00:02

Welcome. My name is Len Lane, and I am the founder and president of Brokers for Life Inc., and we are Dominion Lending Centers in Western Canada. The topic of our podcast will be about what we consider to be Real Life Mortgage Solutions.

Len 00:20

Welcome back. Today, we’re going to talk about building a home lots of different scenarios that we’re going to talk about, ranging from starting out with an empty lot to actually doing a private build and building it yourself. My guest today is Leslie Kearns. She is a broker experience specialist with Alberta Treasury Branch. Welcome. 

Leslie 00:41

Thank you for having me. 

Len 00:43

We’re in the spring market. Things have picked up considerably, it seems or feels like, anyway, but a lot of the calls, of course, we get this time of year are for people who are looking to build the house back a little bit before that the you know, obviously some different scenarios walk us through how each one is a little different, and what kinds of requirements you guys look for for these scenarios? So clients buying bought a lot, and now they’re going to get a certified home builder to build it, but he needs to draw a mortgage. How does that scenario work?

Leslie   01:16

So if the clients already own the lot and they own it outright, we can look, look at using some equity from that land that they own outright as per title, and they could take up the loan to value amount out if they needed some more cash up front for down payment for the builder. So that loan to value is based on the location and the purchase price or the value of that lot. When you already own that, the clients already own the lot, and they have a third party, new home builder going to build their home for them. They would put them together in the sense of the purchase price is the value of the land plus the value of the build. So if the land is 200,000 and the build is 800 you have a million dollar purchase price, but you would have $200,000 of equity already in that land piece. Or if you wanted to take some out to give the builder, because they want some cash up front, we can look at doing that as well. That is dependent on an appraisal, it can be insured, and it can be conventional either way. So the loan to value on that million dollar home or property that they’re going to have would be based on, again, location, on what the loan to value can be when we’re building it. Typically conventional mortgages are 80% but it might be less, let’s say, if you’re in more a rural area versus an urban area like Calgary or Edmonton. When they’re going to do this, what happens is, we need that contract from your third party builder. We need it to be signed by all parties. It needs to meet ATB requirements. And when I say ATB requirements, the biggest thing is it’s new home warranty, as per the Alberta warranty that we have to have. It’s a fixed price contract. It cannot be a cost plus. So a cost plus is the builder saying we will build your home now for 800,000 but if costs for contractors or materials go up, we may charge you 8%, 18% we will not do the cost plus, because it becomes very fluid on what that money is that we’re trying to lend you, and it can become a real mess, is what it can because you’re approved for a certain amount when we when we start that draw mortgage. So in this contract, the builders will put out what they would like to see for their draws. At ATB, we’ll do four draws. The draw amount is dependent on the purchase price of what we’re building. How much is down payment? So basically, what your finance amount is. So once we look at that, we have the four draws. The cost for that is $650 which comes off your first draw with the solicitor. And those, that $650 includes draw 1, 2, 3, and 4, and that is when your builder is requesting to have funds when they get to each stage of those draws. The draws are pretty specific in what they need to be done. We have a very specific draw stage on minimum amounts and things like that. We actually have just restructured it to show a minimum amount. That minimum amount would be based on not doing your first draw and doing draw one and two together. If they do the inspections, you can get more money for that draw as long as they have met what we have to be on our draw form.

Len  04:51

Right. So two things there, I think stand out is the fixed rate contract. So if they are. Building with a fixed rate contract, and do add things that then becomes the client’s responsibility to pay separately, right? 

Leslie   05:08

It does become the client’s responsibility to pay those so basically, what happens is those clients would be then giving an addendum to their draw, to their build to the solicitor, and they’d have to come up with those funds. If not, we can’t, we could go back, but you have to be renewed like you have to be reapproved. You’re basically starting over, and you have to be reapproved. So you should be quite certain what you’re going to build and what it looks like with your specifications, everything else that’s coming in. 

Len  05:38

Yeah, and that’s what I’ve seen lots of times where it’s now you’re $100,000 more, and you added some nice cabinets and a few other things, but you forgot that you couldn’t add those into your mortgage. So, so the builder world a little bit different. My favourite ones to do, of course, are somebody’s buying directly from a builder, and the builder needs to draw a mortgage. That, how easy is that process?

Leslie   06:03

That one is easy too, in the sense of, so when you send in your contract, it’s g…