Construction Mortgages in Ontario: Everything You Need to Know

Posted on 13th September 2016

Construction mortgages are increasingly popular in Ontario with many choosing to build custom homes to meet their specific needs—needs that are not being met with the homes currently available on the market. Designing and building a custom home can be exciting, but it also comes with a unique set of, financial challenges.

Qualifying for financing the construction of a new home is very different than qualifying for a mortgage to buy an existing home. For starters, the process of qualifying for a construction loan is much more rigorous with construction mortgage lenders in Ontario because they will need a lot more information about you. On top of that, they might even require a bigger down payment than the minimum 20% needed for an existing home.

This is because there are a lot more risks associated with seeing a new home through the construction phase as opposed to purchasing an existing home. Moreover, you will need more capital during the construction process. As a result, mortgage construction lenders will only lend money based on the value of the home at the different stages of construction and not at the home’s future value.

Purpose of Construction Mortgages

Construction mortgages are required for home builders who are purchasing land for the immediate construction of a principle residence, or of a cottage or leisure home for their personal use.

Custom home builders will also need a construction mortgage if they already own their own land and need money to cover the immediate, upfront construction costs before the first advance is dispersed by the lender.

Different Types of New Construction Mortgages

There are three different ways you can finance your newly constructed home in Ontario.

  • Builder/Contractor: You have hired a registered contractor to build your custom home with your own money.
  • Self-Built Home: You have your home built and act as your own contractor.
  • Buying a Newly Constructed Home: The contractor builds the home with their own money and you need to pay the builder when you take possession of the property.

Construction Mortgage Financing Options

In each of the above three types of new construction there are different kinds of financing options. There are variations in each one related to timelines and conversion. If you’re looking for construction financing in Ontario, you can build you home with a Process-Draw mortgage, Completion mortgage, or combination of the two.

Process-Draw Mortgage

A Process-Draw construction mortgage is advanced at different stages during the construction process. There are usually three draws (sometimes four) at 35% (roofing is complete), 65% (after plumbing and electrical is completed but prior to drywall installation), and 100% (final occupancy).

During each stage, the construction has to pass inspection before you receive the next payment. With a Process-Draw construction mortgage, interest is charged on the total amount advanced. And the final advance is released when the home passes its final inspection.

Completion Mortgage

A Completion mortgage is needed if you have built or purchased your home through a residential home builder and only really need the funds when the house is finished and you’re ready to move in. Unlike a Process-Draw mortgage, with a Completion construction loan, you typically only need a small down payment to start and only need full payment when the home passes the final inspection.


In some cases, you can start with a Process-Draw loan, which is then converted to a Completion construction mortgage. The single advance loan that comes when the home is finished acts like a regular residential mortgage. Ontario’s Construction Mortgage Lender

A lot of Canadians build custom homes to suit their lifestyle needs and personal tastes. If you’re in the initial stages of planning your custom home, it’s important to talk to a lender about financing your construction loan.

They will help you determine your budget and can also help you get pre-qualified or -approved for a home construction mortgage . If you already own the lot, it and other real estate can be used as equity. Equity is important as it shows potential construction mortgage lenders that you can pay back the loan.

With an in-depth understanding of construction mortgages, the independent, licensed agents at can provide you with all the support you need from start to finish.

Keep in mind that the process to getting a construction mortgage loan is much more rigorous than it is for a regular residential mortgage. Lenders will want to see proof of income, credit history, as well as a record of assets.

That’s why it’s imperative that you work with a lender who understands the nuances of the Ontario construction mortgage industry. The construction mortgage experts at will look over your financial situation and help you determine what kind of construction loan you qualify for.

Reviewing everything will also help determine how attractive you are to various construction mortgage lenders. After all, every lender’s construction mortgage program will be a little different.

Because agents are independent, they don’t just look at Canada’s big banks, which can be restrictive when it comes to construction mortgages. They have access to hundreds of different lenders; some specialize in construction mortgages while others lend to those with bruised or damaged credit. At, we’ll help you find the best construction mortgage with the best rates.

If you are interested in finding out more about construction loans or want to know what kind of construction mortgage you qualify for, contact today or apply online and a mortgage specialist will set up an appointment at your earliest convenience.

Awards & Recognitions