bcr design build

How to Build a House With No Money (Sort Of)- Financing Options

Building a house is not easy. It takes time, effort, and money. The good news is you can build a house with no money – well, more so a small amount in your pocket!


There are many different types of financing available. In this blog, you’ll know the best kind of financing you can use before building your new dream home!


How Can I Build a House With No Money?

Before you can learn the different loans you can get to build your home, you should consider the major purchases first.



To build your dream home, you need land. You need to buy or apply for a separate loan that requires a large deposit of up to 35% of the total price.


If you need financing, you can get a loan from private lenders or institutions offering Home Equity Line of Credit (HELOC). You’ll know more about this financing option later.


Buying a New Property

You can buy a new home with the help of mortgages.


If you want to buy a new or a pre-constructed property from a home builder, you can use the First-Time Home Buyer Incentive or a Completion Mortgage.


Types of Financing to Build a House With No Money

Although you don’t have to pay for a lump sum of a huge amount of money, you’ll still need to have some savings to cover the down payment and a few extra expenses.


If you have no money to cover them, you can ask for loans from friends or family members. You can also use your other assets as collateral for a few loans from private institutions.


The following are types of financing you can use to build a house.



Home Equity Line of Credit loan is the type of financing where the lender will use your home as collateral. You can choose to combine this financing option with a mortgage or use it independently.


First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive is a type of shared equity mortgage. The Government of Canada will have its share of investment in your house. You are eligible if you are a first-time homebuyer and a low-to-medium income earner.


What happens is the government will lend you a part of the total price of the house, which can be the home you want to buy from a builder.


This loan is unique because the repayment doesn’t come with interest, and there are no prepayment fees. You only have to pay after 25 years or only if you want to sell the house. But you can choose to pay it back even before 25 years.


The repayment cost depends on the value of your home in the market. The higher the value is, the higher the repayment cost and vice versa.


Completion Mortgage

The lenders commonly require a down payment in this type of financing. This is because the finalization of the mortgage takes only 30 days before you can claim full ownership of the new home you bought from a builder.


However, you can pay the loan in installments.


Progress Draw Mortgage

The amount that you can get from this loan is up to 75% of the total cost of the construction. It means that you should pay for the remaining part of it, which you can acquire from other loans.


With this type of mortgage, the lenders will pay for the contractors and supplies. Some lenders would require you to have a lawyer who would disburse the loan to the contractor., while others would prefer to pay the contractor directly.


The disbursement of the loan is divided into stages based on the construction process. The contractor will only receive money after the completion of each stage.


The first phase is the foundation drawing, which you can only get after paying the mortgage of your land in full or if you only have a few mortgages for your land left.


If you’re still paying for the mortgage of your land, you will have to shoulder the construction expenses until 30% to 50% of your house is complete.


This type of loan needs monthly repayments even though the construction is still ongoing and not reaping the benefits from your home yet.


After the construction is complete, you will either refinance to convert the loan into a conventional mortgage or pay the loan in full.


What Is the Best Way to Borrow Money to Build a House?

No reputable lenders would be willing to entrust their money to you if you can’t pay it back.


For this reason, the best way to borrow money is the following:


Have a stable source of income.

If you have a stable job, it assures your lender you will pay the principal and the interest as scheduled.


Maintain a good credit score and history.

The most common way to assess your ability to pay is by looking at your personal credit history. If you have maintained a high score, it shows that you are responsible when it comes to paying back the loan.


Pay a large down payment.

The higher the value is, the more it shows that you can pay your debts.


Is It Hard to Get Approved for a Loan to Build a House?

It depends. If you have a bad credit score, it will be hard for you to get approved for a loan, but it doesn’t mean that it is impossible.


If you have a bad credit score, you should work your way into having a good credit score that will get you approved for a loan. The best way to do this is to get a stable job and pay for your previous loans.


If you find it hard to get a good credit score but still want to build a house for zero to little cost, some private lenders accept clients with bad credit scores. However, it is often unadvisable, as most lenders require a higher down payment and interest.


(Also read: Ways to Reduce Your Luxury Home Construction Cost)



Building a home can be expensive, especially when you factor in the building costs and associated expenses. If borrowing money from a bank is not an option, other ways will help you build a house with no money in the bank.


Once you’re sure of your plans of building a new home, contact BCR today, and live in a house that you’ve been dreaming of.


Basement Options