Construction Financing - Mortgage Broker in Ontario

Construction financing plays an important role in helping Canadians build, renovate, or expand residential properties.

Unlike a traditional mortgage, a construction loan is typically a short-term financing solution designed specifically for the construction period. Funds are generally advanced in stages, or “draws,” as construction progresses and certain milestones are completed.

Interest rates, loan amounts, and qualification requirements can vary depending on the project, property value, construction budget, borrower qualifications, and current market conditions.

Whether you are building a new home, completing a major renovation, or adding to an existing property, the right construction financing can help provide the funds needed throughout each stage of the project.

If you require construction financing, we have access to a range of lending options designed for projects of different sizes and complexity.

Construction loans are often structured with interest-only payments during the construction period, helping reduce carrying costs while the work is underway. Financing amounts and terms will depend on factors such as the project scope, property value, construction budget, borrower qualifications, and lender guidelines.

Whether you are completing a smaller renovation, building an addition, or undertaking a larger construction project, we can help identify financing options that provide access to the funds needed at each stage of construction.

By arranging financing that is appropriate for your project and budget, you can better manage construction costs and keep your project moving toward completion.

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Construction Financing FAQs

What are the features of this type of financing?

Construction financing may be available for up to approximately 75%–80% of the property’s as-completed value, depending on the lender, project, and borrower qualifications.

Funds are typically advanced in stages as construction progresses, and interest is charged only on the amount that has actually been advanced.

Some construction financing programs also allow the loan to be paid out early without a prepayment penalty, which can be beneficial if your project is completed ahead of schedule.

Loan-to-value limits, draw requirements, interest rates, and repayment terms vary by lender and project.

Who is Eligible for this Type of Loan?

Canadian citizens and permanent residents may be eligible for construction financing, subject to lender qualification requirements.

If you are new to Canada and do not yet have an established Canadian credit history, alternative forms of credit verification may be considered. Depending on the lender, this could include international credit history, banking records, rental payment history, or other documentation demonstrating your ability to manage financial obligations responsibly.

How long are the terms?

The loan is fully open for a 1 year term.

What Debt-Service Ratios Are Required?

Debt-service qualification is based on the ratios required for the permanent, or “takeout,” mortgage that will replace the construction financing once the project is complete.

For applicants with a Beacon credit score below 680:

Maximum GDS: 35%
Maximum TDS: 42%

For applicants with a Beacon credit score of 680 or higher:

GDS: No specified maximum
Maximum TDS: 44%

These ratios are used to confirm that the completed property and permanent mortgage will remain affordable based on the borrower’s income and existing debt obligations.

Additional lender requirements and conditions may apply.

How do the draws work?

Prior to each construction draw, an appraiser or qualified inspector will typically inspect the property to confirm the percentage of work completed. Draw amounts are then determined based on the verified progress of the project.

Construction draws may be subject to a statutory construction lien holdback. These funds are released once the applicable lien requirements and lender conditions have been satisfied.

With eligible programs, there is no lender draw fee, helping reduce the additional costs associated with accessing funds throughout the construction process.

What are the fees for this type of loan?

$900 + HST Mortgage set-up fee, 1.25% lenders fee and closing costs paid by borrower. No draw fee. Appraisal fee will apply.

How much down payment do I need for a construction loan?

Construction loans typically require a larger equity contribution than a traditional mortgage, often in the range of 20%–30%, depending on the lender, property, and scope of the project.

Lenders will also want to confirm that the project has a realistic construction budget and completion timeline. Depending on the type of project, they may require documentation relating to the builder or contractor, including experience, licensing, permits, contracts, and insurance.

These requirements help the lender confirm that the project is properly planned and has a reasonable path to completion.

What is the difference between a construction loan and a traditional mortgage?

A construction loan is short-term financing designed to fund a property while it is being built or substantially renovated. These loans are generally in place for the duration of the construction period, often up to approximately 12 months, although terms can vary by lender and project.

A traditional mortgage is long-term financing that may be amortized over 25 or 30 years, depending on the lender and mortgage program.

Once construction is complete, the construction loan is typically paid out through a permanent or “takeout” mortgage, the sale of the completed property, or another approved source of repayment.

Construction financing may be available for both residential and commercial projects, with qualification requirements varying based on the property, borrower, and type of development.