Financing a new home: what your pre-approval doesn’t cover

Élodie just signed a preliminary contract for a new $425,000 condo. Delivery is scheduled in 14 months. She has a pre-approval in hand and considers her financing settled.

We see this reflex often. But with a new home, the mortgage is only funded at delivery. That’s when the lender confirms everything still holds, and a lot can change in 14 months.

A pre-approval mainly tells you your budget and often holds a rate for a limited period, usually a few months. When delivery is a year or more away, that rate hold expires well before you get the keys.

Some lenders offer extended rate holds for new construction, which can go up to 12 months. However, not every lender offers them, and their conditions vary. Add to that delivery delays, which are common in new construction. This is one of the areas where comparing several lenders really makes a difference.

Between signing and delivery, life goes on. The lender doesn’t always check your situation again before releasing the funds, but nothing guarantees it won’t. You should always assume it will, and reach delivery with a file that still holds up.

Depending on the numbers, each of these changes can reduce your borrowing capacity and affect how your file qualifies. A larger car loan or a new job that pays less, for example, can be enough to change the picture. That’s why it’s important to talk to us before the change happens, not a week before delivery.

The lender finances based on the lower of the two amounts: the purchase price or the appraised value. With a new home, the price is set long before the appraisal. If the market has moved in the meantime, or if some upgrades aren’t recognized at full value, you cover the gap.

It’s not the most common scenario, but it’s the one you want to have planned for.

Options and upgrades (countertops, flooring, appliances) push the price up. Depending on whether they’re added to the contract or paid directly to the builder, they can change the required down payment, and the appraisal doesn’t always recognize them at their real cost. Keep a written record of everything you add.

Taxes: a new home bought from a builder is generally subject to GST and QST. Check whether the price in your contract includes them. Partial new housing rebates exist, but their price ceilings ($450,000 for GST, $300,000 for QST) are exceeded by many homes today.

For a contract signed with a builder on or after March 20, 2025, a GST rebate for first-time buyers of a new home can reach $50,000. It covers the full GST up to $1,000,000, then phases out gradually up to $1,500,000. The conditions (first-time buyer status, principal residence, construction dates) are specific and worth checking before you count on it.

As mortgage brokers, we are not accountants or tax specialists. For anything related to taxes and rebates, confirm your eligibility with Revenu Québec, which administers GST and QST in Quebec, or with a tax specialist.

If the builder defaults before delivery, the Garantie de construction résidentielle (GCR), Quebec’s mandatory guarantee plan for new residential buildings, can reimburse up to $50,000 in deposits (per unit for condos).

The plan covers detached, semi-detached and row houses, plexes of up to five units, and condo buildings with no more than four units stacked on top of each other. A condo in a taller building isn’t covered by this plan. Before paying a large deposit, ask what protection the contract provides.

On the financing side, your deposits are part of your down payment. Keep every receipt, the lender will want to see them.

With a new home, your file gets approved twice. The first approval sets your budget. The second, at delivery, is the one that releases the funds. In between, keeping your file stable is your best ally.

Élodie had her budget validated at signing and kept a reserve in case of an appraisal gap. She put off buying a car until after she got the keys, then contacted us four months before the scheduled date to secure her rate hold. Delivery was eventually pushed back six weeks. Since the file had been planned for it, adjusting the dates was all it took.

Have you signed for a new home, or are you thinking about it? Let’s talk it through together. As you probably already know, our services are free.