Short answer
Construction financing commonly releases money in stages after work is completed and inspected. You usually need land equity or cash to begin, pay deposits and cover gaps between contractor invoices and lender draws.
The client problem behind the question
The borrower owns a lot and has a builder quote but assumes the full mortgage will be available on day one.
What the official guidance establishes
CMHC Improvement includes advancing options for large improvements and new construction. The approved lender sets draw stages, inspections, interest charging and documentation, while provincial construction-lien rules affect holdbacks and payments.
Where the answer can change
A completion appraisal is not the same as a progress inspection. Draw percentages may not match invoices. Cost overruns, delayed permits, weather, change orders and builder failure can create a cash shortage even when the finished value remains strong.
A practical Ontario example
Illustration only: A lender advances after foundation, lock-up and completion. The builder requests a deposit before the foundation draw, and a change order adds $30,000 that was never included in the approved budget.
What to do before committing
Prepare a sources-and-uses schedule showing land value, cash, deposits, each draw, taxes, interest, lien holdback and a contingency. Have the lawyer review the building contract before the lender finalizes the facility.
Questions Rajiv would ask
- What deadline, condition or closing problem must be solved?
- Which facts are confirmed by original documents and which are still assumptions?
- Which law, insurer rule or lender policy applies to this exact transaction?
- What happens to the cash requirement and monthly payment if the first option fails?
- What is the practical route back to lower-cost financing, if temporary financing is used?
Rajiv’s broker perspective
I would match the financing to the contractor schedule, not only to the finished value. The practical review includes how much cash is needed before each draw, whether permits and rent are supportable, and what happens if the project costs more or takes longer. A, alternative/B, MIC and private options can each work, but the exit and total cost must be clear before construction begins.
Related: Mortgage declined? Start here · Mortgage Knowledge Centre · Real Estate Centre · Updates & Rules Centre
Would a second opinion help before you commit?
Send Rajiv the property, deadline, financing concern and the documents already available. He can identify the missing questions, compare practical mortgage routes and explain the next step in plain language.