A construction or draw mortgage funds a build in stages instead of all at once, with money advanced as the work is completed and verified. The piece to plan from day one is the exit: how the construction loan is repaid at the end, by your take-out financing or a sale, or on some files by converting to a longer-term mortgage. It works differently for a homeowner building their own home than for a builder, and we map both.
Money is advanced in draws as the build reaches each stage.
Progress is confirmed before each advance. How it is verified varies by lender, from a cost consultant to an appraiser to a private lender's own process.
Typically interest only on the funds advanced during the build.
A portion is held back until the builders' lien period passes.
Repaid by take-out financing (the mortgage that replaces the construction loan) or by a sale. On some files it converts to a longer-term mortgage instead.
Draws are released as work is verified, and can come monthly or more often depending on how the build is progressing. The stages below are a common pattern, not a fixed schedule.
Before each advance, the lender confirms the work is actually in place. How that happens depends on the type of financing, and it shapes your cost, your timeline, and how much sits on you.
On larger or more complex projects, an independent QS reviews the budget and signs off on each draw against progress. Thorough, and a cost to build into the plan.
On many residential and smaller builds, an appraiser or a lender inspector verifies each stage before funds are released.
Private lenders set their own draw and verification process, which can be faster and more flexible. Private lending is one option to review, not a default.
The project (plans, budget, and a realistic timeline), the builder's experience, your land and equity in the deal, and a clear exit, the take-out mortgage or sale.
Plans and permits, a detailed budget and draw schedule, your builder's details, and proof of equity or down payment. The clearer the file, the smoother each draw.
Planning a build or a project? Bring us the plans and the budget and we will walk through how the financing could be structured. A licensed member of our team will follow up.
Start a conversationInformation here is general and educational. It is not financial, legal, or lending advice, and it is not an offer of financing. Construction financing, draw schedules, and holdback rules vary by lender and by province. Any figures or stages shown are illustrative only. All financing is subject to lender and project review and supporting documentation. Submission of a form does not guarantee approval or financing.