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Mortgage Squad Advisors
Construction

Construction mortgages: building your own home? We fund each stage as you build.

Money is released in stages — foundation, framing, lock-up, completion — to match your builder's invoices. Borrow up to 80% of the finished value conventionally, or more with an insured progress-advance mortgage on a home you will live in. Works for owner-builders too.

Typically 3 to 5 draws (2 on small projects)Up to 80% of finished valueOwner-builders welcomeBuy lot + build9–18 month build windowConverts to a regular mortgage at completion
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Written by the Mortgage Squad Advisors Editorial Team · Reviewed by Surrayya Afzal, Principal Broker, FSRA #M14001433 · Updated June 2026

Building your own home?
We fund each stage as you build.
Money is released in stages — lot purchase, framing, lock-up, and completion — to match your builder's invoices.
Build progressLot
LotFoundationFramingLock-upDrywallCompletion
3-5
Typically 3 to 5 draws (2 on small projects)
9-18mo
Construction window
65-80%
LTC at draw
Take-out
Take-out at completion
Get pre-approved Draw schedule
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How do construction draws work?
FSRA #13737| 15+ languages
100+ lenderscompared on one application
FSRA #13737licensed Ontario brokerage
15+ languagesspoken by our advisors
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Construction financing has its own playbook: lender selection, builder qualification (or owner-builder process), draw schedule, holdback management, and conversion to a regular mortgage at occupancy. We coordinate everything.

An aerial view of a residential neighbourhood
The short answer

Construction draws release funds at 3-5 stages (foundation, lockup, drywall, completion). The mortgage 'completes' at occupancy and converts to a regular mortgage. Plan a 9 to 18 month build window.

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Your construction draw schedule

Funds release in stages; you pay interest only on what's drawn. See the rough schedule.

Your equity first (20%)$120,000 from your own funds
1. Foundation$0 drawn · ~$0/mo interest
2. Framing / lockup$120,000 drawn · ~$800/mo interest
3. Drywall / mechanical$270,000 drawn · ~$1,800/mo interest
4. Completion$480,000 drawn · ~$3,200/mo interest

Illustrative at 8.00% (September 2026). Not a rate offer. Total draws capped at the lender limit of $480,000 (80% of cost).

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Do I qualify for a construction mortgage?What documents will I need?How fast can this close?
On this page
  1. How does a draw (progress-advance) construction mortgage actually work?
  2. Completion (as-complete) appraisal vs cost-to-complete — how is my loan sized?
  3. What is the construction holdback and why does it affect my cash flow?
  4. When does interest-only become a permanent mortgage, and how do I lock it?
  5. Self-build vs builder-contract: deposits, contingencies, and where alt financing fits?
  6. FAQ

How does a draw (progress-advance) construction mortgage actually work?

A draw mortgage releases your approved funds in stages rather than as one lump sum. Typical advances align with construction milestones — foundation, lock-up (framing, roof, windows), drywall and interior finishing, then completion — and each release is triggered only after a lender-ordered inspection or appraisal confirms that stage is genuinely finished. The practical upside: you pay interest only on the funds actually advanced, so your carrying cost early in the build (when little has been drawn) stays low and climbs as the home nears completion. Your builder invoices against the schedule, the lawyer disburses, and we coordinate inspection timing so trades aren't left waiting on cash. Because every lender structures draws differently — typically 3 to 5 draws (2 on small projects) — matching the schedule to your cash flow is where broker selection matters. Explore lot or land financing if you're buying the site first.

Completion (as-complete) appraisal vs cost-to-complete — how is my loan sized?

Lenders don't size a construction loan against today's empty lot; they size it against the home's projected finished value. With an as-complete appraisal, an appraiser reviews your plans, specs, and budget, then estimates what the property will be worth once built — and your loan is generally capped at up to 80% of that completion value. The cost-to-complete view runs in parallel: lenders compare your hard and soft construction costs (materials, labour, permits, site work) against remaining funds at each draw to confirm the project can actually finish on budget. If either number falls short, the loan shrinks or requires more equity. This is why a realistic, itemized budget with a contingency line is worth as much as the appraisal. We match your file to a lender whose appraisal and budget tolerances fit your build, drawing on relationships with 100+ lenders including specialty and private sources.

What is the construction holdback and why does it affect my cash flow?

Ontario's Construction Act requires the owner to hold back 10% of what is paid to each contractor until the lien period ends; lenders build that holdback into each draw. The Act's prompt payment rules also set invoice payment deadlines, so line up draw inspections with your builder's invoicing.1 Under the Act, the 10% holdback is retained through the lien period, generally 60 days after completion, abandonment or certified substantial performance1 so that unpaid subtrades and suppliers have recourse before final funds are released. For you, the holdback means the last slice of each draw doesn't arrive when the work does; it's released only after the lien period passes with no liens registered. Plan for this gap. If your builder expects payment in full at a milestone but the lender retains 10%, you may need to cover the difference temporarily. We flag the holdback math up front, coordinate with your lawyer on lien-period timing, and where a short gap appears, point to bridge financing so trades stay paid and your schedule holds.

When does interest-only become a permanent mortgage, and how do I lock it?

During the build you carry an interest-only payment on advanced funds — manageable while you may also be paying rent or another mortgage. At completion (typically occupancy or substantial completion), the final advance funds and the construction facility converts to a permanent take-out mortgage — a standard fixed or variable term that amortizes principal and interest like any other. The conversion isn't automatic peace of mind, though: rate exposure is the risk. Some lenders offer extended rate holds on construction or new-build files, usually with conditions; otherwise the take-out rate is set near completion. We confirm which structure your lender uses before you commit, so a long build doesn't leave your finished home exposed to a higher rate. If your completion timing slips, we can also line up interim options to bridge to the take-out.

Self-build vs builder-contract: deposits, contingencies, and where alt financing fits?

A registered builder-contract build is the smoothest path — lenders trust a fixed-price contract and a vetted contractor. Owner-builder (self-build) files are doable but demand more: detailed budgets, proof you can manage trades, and tighter inspection scrutiny, since the lender carries more risk without a general contractor. Either way, expect to fund deposits and early site costs yourself before the first draw lands, and build a contingency of roughly 10–15% into your budget — change orders and overruns are the norm, not the exception. When a draw timing gap, a budget overrun, or an owner-builder profile pushes a file outside a bank's box, private and alternative financing bridges it. As an FSRA-licensed brokerage (#13737) with complex-draw expertise, disclosed fees, and service in 15+ languages, we can look at private and alternative lenders when a bank's policy doesn't fit your file. Major remodels can also route through a renovation mortgage.

What you get

Why Canadians choose Mortgage Squad Advisors.

Progress advances at each stage (3-5 typical)
Convert to regular mortgage at completion
Owner-builder programs available
Custom build, lot purchase + build, or major reno
We coordinate with your builder & lawyer
Up to 80% LTV on completed appraised value
Insured progress-advance options for owner-occupied builds under $1.5M (5% of the first $500,000, 10% above).23
Extended rate holds available from some lenders
How it works

Three simple steps, no pressure.

  1. 1

    Pre-Approval + Builder Vetting

    We confirm you qualify on completed value. Lender vets your builder (or your owner-builder plan).

  2. 2

    Draw Schedule

    Funds release at agreed stages. In Ontario a 10% lien holdback is retained until the 60-day lien period after completion passes.

  3. 3

    Convert at Occupancy

    Final advance funds. Your construction mortgage converts to a regular (5-yr fixed or variable) at occupancy.

Start your pre-approval — 5 min
FAQ

Common questions, answered.

Don’t see yours? Ask Maya — instant answer, any time.

How many draws are typical?
3-5: foundation, framing/lockup, drywall/finishing, completion (+ holdback release). Some lenders offer 2-stage draws on smaller renos.
Do I pay interest during construction?
Yes, on the drawn balance only. Interest is usually payable monthly on the amount drawn; some lenders allow it to be capitalized or paid from the next draw.
Do I need a contractor?
Most lenders prefer a registered contractor. Owner-builder programs exist but require more documentation and inspection. In Ontario, owner-builders should confirm their status with the HCRA, and may be able to claim the GST/HST new housing rebate for owner-built homes (CRA form GST191).
Can I include the lot purchase?
Yes — combined lot + build mortgages are common. Lot is funded first; build draws follow.
What's a holdback?
A 10% holdback retained under Ontario’s Construction Act (formerly the Construction Lien Act) until the lien period ends, generally 60 days after the contract is completed, abandoned or certified substantially performed1. It’s released if no liens are registered in that time.
Can I do a major reno on this product?
Major structural renovations can use a draw structure; see our home renovation mortgage page.
What's the rate during construction?
It varies by lender. Some charge a modest premium or a floating rate on advanced funds during the draw period, others hold a rate for the take-out; your rate converts to the permanent mortgage rate at occupancy. We confirm the lender’s structure before you commit.
What if my build goes over budget?
Common issue. We can sometimes increase the construction mortgage if completed value supports it. Otherwise, a HELOC or short-term private supplement works.

Related products

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Sources & references

Figures on this page are sourced below and re-checked each quarter. Rates, insurer rules and lender policies change — confirm anything you plan to act on with a licensed advisor.

  1. 1. Government of Ontario (e-Laws), Construction Act, R.S.O. 1990, c. C.30 (Accessed September 2026) — Owners must retain a 10% holdback; a contractor’s lien must be preserved within 60 days after completion, abandonment or certified substantial performance; the prompt payment rules set invoice payment deadlines.
  2. 2. Canada Mortgage and Housing Corporation (CMHC), CMHC Purchase: mortgage loan insurance (Accessed October 2026) — Insured owner-occupied homes: 5% of the first $500,000 and 10% of the remainder, purchase price below $1,500,000; progress advances are permitted on new construction.
  3. 3. Department of Finance Canada, Boldest mortgage reforms in decades to unlock homeownership (Effective December 15, 2024 · accessed October 2026) — The price cap for insured mortgages rose from $1 million to $1.5 million on December 15, 2024.

Ready when you are.

No obligation, and no credit pull to begin. A licensed advisor reviews your file with you, and Maya, our AI assistant, can answer quick questions any time.

Start your pre-approval — 5 min Chat with Maya