Construction Financing in British Columbia
Financing a new home build requires careful planning before construction begins.
Doug has helped hundreds of homeowners with residential construction projects and has also built his own home. He will help you review the land, plans, budget, builder, available equity, construction draws and completion financing before you break ground.
What Is a Construction Mortgage?
A construction mortgage, sometimes called a progress-advance mortgage, provides financing in stages as the home is built. Instead of advancing the full mortgage at the beginning, the lender releases funds after specific construction milestones are reached.
Each advance is usually supported by a progress inspection confirming the value of the completed work. The lender may retain a portion of each advance to satisfy construction-lien requirements.
Once construction is complete and all final conditions are met, the financing is converted into or replaced by the long-term completion mortgage.
Common Construction-Financing Structures
Builder PurchaseThe homeowner purchases a newly built home from an established residential builder under a purchase contract. The builder normally controls the construction process. |
General Contractor BuildThe homeowner owns or purchases the land and hires one qualified general contractor to manage the construction and coordinate the trades. |
Owner-Builder ProjectThe homeowner acts as the general contractor and hires the individual trades. These projects may require more experience, equity, documentation and lender oversight. |
Do You Already Own the Land?
Land Already OwnedAvailable equity in the land may form part of the borrower’s required contribution. Existing mortgages, liens and the confirmed land value will affect the usable equity. |
Land Being PurchasedThe lender will review the land purchase, zoning, servicing, building plans, construction budget and the source of the borrower’s down payment and equity. |
What Lenders Review Before Approval
The Borrower and Project
✓ Income, credit and existing debts |
The Property and Build
✓ Land value, zoning and servicing |
A Detailed Construction Budget Is Essential
The budget should include every major component of the project, not only the building contract. Missing costs can create serious cash-flow problems during construction.
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✓ Land and site preparation ✓ Plans, engineering and permits ✓ Foundation and structural work ✓ Labour and building materials ✓ Utility and servicing costs |
✓ Interior finishing and fixtures ✓ Landscaping and exterior work ✓ Taxes, fees and inspections ✓ Financing and interest costs ✓ Construction contingency reserve |
Plan for Cost Overruns
Construction projects can be affected by changing material prices, weather, site conditions, design changes, delays and unexpected repairs or servicing costs.
A lender may require a contingency reserve, but the homeowner should also maintain enough liquidity to manage expenses that arise before the next draw is available.
How Construction Draws Work
1. Work Is CompletedThe builder completes the work required for the next approved construction stage. |
2. Inspection Is OrderedA progress inspector confirms the percentage of work completed and the property’s current value. |
3. Lender Reviews the DrawThe lender reviews the inspection, invoices, title and any outstanding conditions. |
4. Funds Are ReleasedApproved funds are advanced, subject to any holdback and the lender’s legal instructions. |
Construction Cash Flow Must Be Planned Carefully
Construction advances are based on completed work. Contractors and suppliers may require deposits or payment before the next lender draw is available.
The borrower may need enough cash or credit to bridge expenses between construction stages. Doug will help review the draw schedule and anticipated cash requirements before the project begins.
Payments During Construction
Progress-Advance StagePayments during construction are often based on the amount actually advanced. Depending on the lender and product, interest-only payments may apply during this stage. |
Completion MortgageAfter final completion, the mortgage normally moves to its long-term repayment structure, with regular principal and interest payments. |
Conditions for Final Completion
The final advance or completion mortgage may require confirmation that the home is complete, legally occupiable and free of unacceptable title issues.
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✓ Final progress inspection or appraisal ✓ Occupancy permit or municipal approval ✓ New-home warranty documentation, where required |
✓ Confirmation of completed work ✓ Final title and lien review ✓ Property insurance |
Common Construction-Financing Risks
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Underestimating the complete budget Small omissions across many categories can create a significant funding shortfall. |
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Starting before financing is fully approved Construction work and deposits should not begin based only on a preliminary conversation or estimate. |
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Insufficient cash between draws The lender does not normally advance funds for incomplete work, so bridging cash may be required. |
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Changing plans during construction Design changes and upgrades can increase costs, delay completion and affect the approved value. |
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Ignoring the completion mortgage The long-term financing should be reviewed at the beginning, not left until the project is nearly complete. |
Documents You May Need
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✓ Purchase contract or proof of land ownership ✓ Building plans and specifications ✓ Detailed construction budget ✓ Builder or general-contractor agreement ✓ Permits and zoning information |
✓ Income and asset documentation ✓ Builder qualifications and warranty information ✓ Appraisal or as-complete valuation ✓ Property-tax and insurance information ✓ Additional lender-requested documents |
Why Arrange Construction Financing With Doug?
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✓ More than 35 years of mortgage experience ✓ Experience with hundreds of construction projects ✓ Personal experience building a home |
✓ Review of budgets, equity and draw schedules ✓ Guidance from planning through completion ✓ Construction financing throughout British Columbia |
Let’s Review the Build Before You Break Ground
Tell Doug about the land, proposed home, builder, budget, available equity and timeline. He will help identify the documents, financing structure and cash-flow planning required for the project.
Call Doug: 604-820-4570
Construction Mortgages in Mission and Throughout British Columbia
Doug Lifford Mortgage Services helps homeowners and builders in Mission, Abbotsford, Chilliwack, Maple Ridge and communities throughout British Columbia arrange construction mortgages, progress-advance financing, owner-builder mortgages, general contractor construction financing and completion mortgages.
Construction-financing terms, draw schedules, equity requirements, inspections, holdbacks, rates, fees and lender policies vary by project. This page provides general information only. Obtain personalized mortgage, legal, accounting, appraisal, construction and tax advice before proceeding.