RANKIN INLET - Building a new home in the Kivalliq is not for the thin of wallet.

In fact, unless you have a contractor willing to construct now and collect later, you need the cash to cover it all - up front!

The Royal Bank's Kyle Sheppard of Rankin Inlet said the problem for would-be home builders is the difficulty in securing a mortgage.

He said there's no difference buying an existing home in Rankin than anywhere else in the country.

"The major problem here is not purchasing a home, it's in wanting to build your own home," said Sheppard.

"You get a construction mortgage down south, and your bank finances percentages of the final mortgage at various stages.

"It's called a progress draw, where 25 per cent of the money is released once that percentage of the building is constructed, etc.

"That's not available here because of the timelines and unique situations."

A southern contractor can purchase materials and start building the next day.

In the Kivalliq, materials paid for in March may not reach a hamlet until late summer or early fall.

That can leave $200,000 tied up in materials doing nothing for six months.

Sheppard said banks cannot advance funds on the purchase of materials.

He said that means purchasing the materials out of pocket, or having a contractor willing to do it.

"Banks also require an appraisal to be done, which means an appraiser has to come to the site to assess how far along the construction is.

"With the nearest appraiser being in Yellowknife, you'd have to carry the cost of their travel, house them while here, and then cover the actual appraisal costs.

"You'd be looking at $4,000 to $7,000 for an appraisal every time a progress drawn was to be done."

The Nunavut Housing Corp. has up to $50,000 available for new home construction in Rankin through its Nunavut Down Payment Assistance Program.

That's about 25 per cent of landed materials for an average-sized home in Rankin.

Sheppard said there's a huge interest in building homes in Rankin right now.

He said progress is stalled by the need to have the money for materials up front.

"Banks have very tight risk tolerances and the risk involved with laying out a massive amount of money, with virtually no security for months on end, is significant.

"Any solution to this problem is going to take a lot of people working together, but there's no easy answer.

"The easiest solution would be for someone to front the money and assume the risk.

"I hate to say it at this point, but good luck with that."

The Canada Mortgage Housing Corp. (CMHC) provides mortgage insurance.

In most of Canada, mortgage insurance is required for anyone without the 20-per-cent down payment on their home's construction cost.

The insurance is not for the homeowner's benefit, but, rather, guarantees the bank its money in case of default.

If the owner goes into default, the CMHC would take possession of the home and pay the bank what it's owed.

Banks demand CMHC insurance on all Nunavut mortgages because of the leased land aspect.

A plebiscite may be held in 2013 to determine if Nunavummiut are ready to allow people to own land to encourage home ownership.

The CMHC is currently studying the challenges to market-housing finance in the North.

CMHC corporate representative for the Nunavut region Terry Ma said the study is cataloguing what's going right, and what isn't, across the three territories.

He said the CMHC needs a comprehensive view of the North in terms of housing finance.

"The study will need levels of approval to create public documents, so it will probably be another year before we see any results," said Ma.

"It's taken many years to get to this point and, as a national organization, the CMHC would want to build from its national program."

Ma said he's not aware of anything in the works to bridge the gap between the need for mortgage insurance, and the delay in material delivery to Nunavut.

He said that doesn't preclude a territorial organization from developing its own program to cover Nunavut's unique needs.

"In any business opportunity, people tend to jump in if there's profit to be made with all risks considered.

"There's a perception of risk from lenders when land leases are involved, and they generally require some form of mortgage insurance, but it's not a Government of Canada or a CMHC requirement.

"We're only talking about a handful on units across the North, from a national perspective, and that's a sticking point for developing a program to address need.

"We (CMHC) can't cherry pick one territory because we have to be able to offer it to everyone."

We welcome your opinions. Click here to e-mail a letter to the editor.