Building your dream home from scratch? Learn how construction mortgages work, the draw process, and what you need to know about financing a newly built home.
A construction mortgage is a specialized financing product designed for building new homes. Unlike a standard mortgage where you receive all the funds at once, construction mortgages release money in stages called "draws" as your home is built.
This type of mortgage is more complex than a traditional purchase mortgage because the lender needs to monitor construction progress and protect their investment throughout the building process.
One mortgage that converts to a permanent mortgage once construction is complete
Separate construction loan that must be refinanced into a traditional mortgage later
Your mortgage funds are released in stages as construction milestones are reached:
Construction mortgages typically require larger down payments because lenders see more risk in the building process:
You typically pay interest only on funds drawn, not the full amount. This keeps costs lower during the building phase.
Lenders send appraisers to verify construction progress before each draw release.
Construction mortgages have longer approval and draw processes than traditional mortgages.
Lenders may vet your builder's credentials, financial stability, and past projects.
Don't forget about the GST/HST new housing rebate! If you're building a new home, you may be eligible to recover some of the GST/HST paid:
Construction mortgages are more complex than standard mortgages. Our experts can guide you through the process and help you secure the right financing.
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