How do construction loans work in BC, Alberta and Ontario, and what do private lenders fund?
Banks lend on a build in stages. When the draws stop or the lot is raw, private lenders fill the gap for 6-12 months.
Written and reviewed by Asim Ali, Mortgage BrokerUpdated 5 November 2026
Licensed: BCFSA (BC) · RECA (Alberta) · FSRA (Ontario) · check our licences
A construction mortgage pays out in stages, called draws, as the build passes inspection. Banks and B-lenders do most of them. Private lenders step in for three gaps. Completion loans when the draws stop, at 65-75% of the as-complete value. Land and lot loans, at 40-65% of value, from very few lenders. And short bridges while you wait for a bank. Private construction money costs 7.49-10.99% interest-only plus 1-2% lender and 1-2% broker fees, on 6-12 month terms. In BC, new multi-unit zoning and the CMHC secondary-suite refinance (to 90% of as-improved value) open more options.
How does a construction mortgage work?
The lender approves a total loan based on the finished value. It then releases money in stages. A common set is foundation, framing and lock-up, drywall, and completion. Before each draw, an inspector or quantity surveyor confirms the work is done. You pay interest only on money already advanced.
If you own the lot, its equity counts as your down payment. A bank usually lends up to 75-80% of the as-complete value. You fund the rest, and you fund it first. Lenders also keep back part of each draw for builders liens. In BC the Builders Lien Act requires a 10% holdback for 55 days after completion. Ontario's Construction Act also requires 10%.
Owner-builder or licensed builder?
Lenders prefer a licensed builder with home warranty. Owner-builders get fewer lenders and lower limits.
Licensed builder
Fixed-price contract, warranty enrolled, a track record. More banks say yes. Draws often go straight to the builder. B-lenders and credit unions also lend here.
Owner-builder
You manage the build. In BC you need an Owner Builder Authorization from BC Housing, with an exam. In Alberta you apply to the New Home Buyer Protection Office; the fee is $750. Expect lower limits and a cost-overrun reserve.
What if the draws stop? Completion loans
Draws stop when costs run over the approved budget. They also stop when a bank pulls back, or a builder walks away. A private completion loan pays out the stalled lender and funds the rest of the build. It goes to 65-75% of the as-complete value. Money is released after each inspection, not all at once. The exit is a bank mortgage at occupancy.
| Illustrative example: Kelowna owner-builder, completion loan | Amount |
|---|---|
| As-complete appraised value | $1,500,000 |
| Bank draw mortgage advanced so far (paid out on day one) | $480,000 |
| Cost to complete, per quantity surveyor | $243,000 |
| Fees: 2% lender, 1% broker, $4,500 legal, appraisal and inspections | $27,000 |
| Private completion loan (50% of as-complete value) | $750,000 |
| Draws | $480,000 day one; $130,000 month 2; $113,000 month 4 |
| Rate and term | 9.49%, interest-only, 12 months |
| Interest over 12 months, on money advanced | $65,544 |
| Total cost (interest + fees) | $92,544; APR about 13.7% |
Exit: occupancy around month 9, then a bank mortgage at 4.5-5.5% (5-year fixed) pays the $750,000 out by month 12. Every month of delay adds about $5,900 in interest.
Land and lot loans: 40-65% of value
Land is the hardest property to finance. Banks rarely lend on it. Few private lenders do. Serviced lots in a city get the most, up to about 65%. Raw rural land gets 40-50%, if anyone lends. Lenders want to see zoning, road access and a plan. Terms are 6-12 months. The exit is a construction mortgage or a sale. The full guide to land loans.
A $400,000 serviced lot at 60% supports a $240,000 loan. That is enough to buy out a partner, pay off a seller's loan, or cover permits and design while the bank approves the build.
BC's multi-unit rules and the CMHC secondary-suite refinance
BC now requires most towns over 5,000 people to allow more homes on single-family lots. Bill 44 and the 2025 Bill 25 set the rules:
- At least 3 units on lots of 280 m² or less.
- At least 4 units on lots over 280 m².
- 6 units on lots over 280 m² near a bus stop with service every 15 minutes.
- Councils must update bylaws by 30 June 2026 under Bill 25, unless extended.
Federally, the CMHC secondary-suite refinance started on 15 January 2025. Sagen and Canada Guaranty offer the same. It lends up to 90% of the as-improved value, on homes worth under $2 million. Amortization can run 30 years. It covers up to 4 units, including yours. The new units must be long-term rentals. Insured progress draws are allowed. Not every lender offers it.
Where private money fits: a fifth or sixth unit is outside the insured program. So is a lender that does not offer it. A short private loan can fund permits or the start of work until a bank or insured refinance takes over.
Draw mortgage vs completion loan vs land loan
| Bank draw mortgage | CMHC suite refinance | Private completion loan | Private land loan | |
|---|---|---|---|---|
| Most you can borrow | 75-80% of as-complete | 90% of as-improved | 65-75% of as-complete | 40-65% of value |
| Rate | 4.5-5.5%, 5-year fixed | Bank rates plus insurance premium | 7.49-10.99% interest-only, 6-12 months | Higher end of private range, 6-12 months |
| Income test | Full | Full | Light; equity and exit matter | Light; plan matters |
| Speed | Weeks | Weeks | 1-3 weeks | 2-4 weeks; appraisals are slow |
| Best for | New builds that qualify | Adding up to 3 suites | Stalled builds, overruns | Buying or holding a lot |
Province differences
BC
Multi-unit zoning on most lots. Owner-builder exam through BC Housing. 10% lien holdback for 55 days. Brokers licensed by BCFSA. BC lenders.
Alberta
Acreages get 50-65% near Calgary and Edmonton, 40-50% for raw land. Well, septic and road reports up front. Owner-builder authorization since 1 December 2025 adds a title caveat if built without warranty. Alberta lenders.
Ontario
Private construction loans come with FSRA's written borrower disclosure at least two business days before you commit. 10% holdback under the Construction Act. Most private construction money is in the GTA. Ontario lenders.
Who lends on construction and land
Few private lenders do this work. We start with these, checked on each lender's site in November 2026:
- Cooper Pacific MIC, Victoria. Construction is a stated focus. Firsts to 75%.
- Three Point Capital, Kelowna. Up to 75% loan-to-value in BC, Alberta and Ontario.
- PHL Capital, Surrey, and Alta West Capital, Calgary. MIC managers that decide file by file.
- Firm Capital, Toronto. Mostly commercial, including larger multi-unit builds.
- Haventree Bank, a B-lender. Its improvements mortgage adds up to $100,000 for renovations.
The full verified lender list.
Construction and land loan questions
How do construction loan draws work in Canada?
The lender releases money in stages as the build is inspected. Foundation, framing, drywall and completion are common stages. You pay interest only on what has been advanced. A lien holdback is kept back from each draw.
How much down payment do I need for a construction mortgage?
Banks usually lend 75-80% of the finished value, so plan on 20-25%. Land you own counts toward it. Owner-builders should also keep a cost-overrun reserve.
Can I get a loan on vacant land in BC or Alberta?
Yes, from a few private lenders. Expect 40-65% of value: more for a serviced city lot, less for raw rural land. Terms are 6-12 months, with a build or sale as the exit.
What happens if my construction loan runs out?
Call before the trades stop. A private completion loan can pay out the first lender and fund the rest, up to 65-75% of the as-complete value. You need a cost-to-complete report and a bank mortgage lined up for occupancy.
Can I get a construction loan with bad credit?
From a private lender, yes, if there is enough equity in the land and a clear exit. Banks will not. Expect the private rates and fees above, and lower limits for owner-builders.
Sources. BC Government, small-scale multi-unit housing (updated 20 January 2026) · Department of Finance Canada, mortgage insurance rule changes for secondary suites, October 2024 · Canadian Mortgage Trends, secondary-suite refinance terms · Sagen, Refinance for Secondary Suites (insured progress draws) · BC Housing, owner builder authorization and exam · Government of Alberta, Owner Builder Authorization · BC Builders Lien Act holdback (People's Law School) · Ontario Construction Act, s.22 holdback · FSRA, O. Reg. 188/08 s. 35 · lender websites, checked 4 November 2026 · Private Mortgage Desk rate sheet, November 2026.
Talk it through with a licensed broker before you decide
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Asim Ali, Mortgage BrokerSurrey office · BC, Alberta and Ontario
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