A broker is reviewing a client scenario where the client secured a new build mortgage five months ago with a construction draw facility. The builder has now completed significant work and is requesting the second draw. What is a crucial step the broker must advise the client to complete before the lender will release the funds for the second draw?

Question: A broker is reviewing a client scenario where the client secured a new build mortgage five months ago with a construction draw facility. The builder has now completed significant work and is requesting the second draw. What is a crucial step the broker must advise the client to complete before the lender will release the funds for the second draw?

Answer options:

• A. Obtain a final occupancy permit from the municipality.
• B. Secure a firm offer to purchase for their existing primary residence.
• C. Have the property inspected by the municipal building inspector for compliance. ✅ D. Provide the lender with an updated appraisal and a progress inspection report.

Correct answer: D. Provide the lender with an updated appraisal and a progress inspection report.

Explanation: For construction draw mortgages, lenders typically require a progress inspection (by an appraiser or designated inspector) at each stage to confirm the work completed aligns with the draw schedule, alongside an updated appraisal if the lender needs to verify the 'as progress' value. This ensures funds are disbursed only as work is completed and collateral value increases.