We provide construction mortgages secured to residential, commercial, and rural real estate across Canada.

A construction mortgage is a loan that is provided for the construction of a property. A construction mortgage can only be used for the construction of a property. Renovation mortgages are slightly different.

Financial institutions have strict lending criteria and it can often be difficult to obtain a construction mortgage. In contrast, private lenders are less stringent and use common sense underwriting. Private lenders are focused on equity, rather than income or credit.

A construction mortgage is provided in several draws, between 3-5 draws or more, depending on the complexity of the project. These loans are typically provided on a Loan to Cost basis. This means your loan amount will be determined as a percentage of your construction cost budget. The budget includes all hard and soft costs. Hard costs include materials and labour; also known as “brick-and-mortar costs.” Soft costs include paperwork and preparation; these are not considered direct construction costs and are typically costs incurred before any actual construction occurs. It is important to have a contingency and interest reserve in case of any delays in the construction process. Therefore, this is usually required by most lenders in your budget. There are some construction loans that may be based on the “as completed” appraised value.

The lender will generally want to see an “as completed” appraisal prior to final approval and will use this same appraiser to do “progress report” update inspections/appraisals prior to releasing each draw. Some private lenders do their own in-house inspections. The “cost to complete” must not exceed the budget, if this does occur, it may be difficult to obtain the funds to complete the project.

A construction mortgage is registered against your property as a first mortgage, second mortgage, or third mortgage. Typically, construction mortgages are registered as a collateral mortgage. This means the mortgage will be registered at an amount and interest rate higher than the rate outlined in the loan agreement. This allows for future increases in the mortgage amount, should the borrower require additional funds to complete construction, and the increase is agreed to by the lender. Therefore, reducing the need for additional paperwork and legal fees.

It is possible to have a first mortgage and second mortgage at the same time. You can even have a third mortgage, fourth mortgage, and subsequent mortgages or loans on a property during a construction. However, it is rare that a property has more than a second mortgage. Construction mortgages typically have higher interest rates and fees than traditional mortgages. You do not need to pay off your first mortgage to obtain a new second mortgage. However, there may be challenges with obtaining a second mortgage if you have a line of credit or collateral first mortgage.

To qualify for a construction mortgage, you must have sufficient equity or down payment. You must also have, at the very minimum, a detailed budget for all hard and soft costs and a detailed plan.

We are an equity-based lender. Regardless of income or credit, if there is sufficient equity, you are approved.

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