Construction mortgages in BC

How it works

What is a draw mortgage?

With a construction or "draw" mortgage, the lender does not release all the money at once. Funds are paid out in stages, called draws, as the build reaches set milestones such as foundation, framing, lock-up and completion.

Before each draw, the lender usually sends an inspector or appraiser to confirm the work is done. During the build you typically pay interest only on the amount drawn so far. Once the project is finished, the loan moves to a regular mortgage or is paid out by one.

• Land plus build: buy the lot and finance construction together.
• Build on land you own: use the equity in your land toward the project.
• Tear down and rebuild: replace an older house with a new home or multiple units.

Projects

Laneway homes, garden suites and multiplexes

Laneway houses and garden suites add a rental unit or space for family. Lenders look at the build cost, the value it adds, and in some cases the expected rent.

Multiplexes: under BC's small-scale multi-unit housing rules, many lots in municipalities like Surrey, Abbotsford, Delta, Langley and Vancouver now allow 3 to 4 units, and some larger lots near frequent transit allow up to 6. Exactly what you can build depends on your lot and your city's zoning bylaw, so check with the city early.

Multiplex financing depends on how the units will be held: kept as rentals, sold as strata units, or a mix. I'll help you match the plan to the right type of lender.

Rental builds

CMHC MLI Select for 5+ unit rental projects

For rental buildings with five or more units, CMHC's MLI Select program rewards projects that commit to affordable rents, better energy efficiency or accessibility. The more points a project scores, the better the terms, with up to 95% loan-to-cost and amortizations up to 50 years at the highest levels.

MLI Select files are detailed and take time. Starting the conversation early, while your design is still flexible, helps you plan for the points you want.

Try the MLI Select points calculator

Preparing your file

What lenders ask for

• Plans and specifications: architectural drawings and a description of finishes
• Permits: a building permit, or where you are in the permit process
• Builder contract with a licensed residential builder, or an Owner Builder Authorization from BC Housing if you are building it yourself
• New home warranty details where required for new homes in BC
• Detailed cost breakdown: land, hard costs, soft costs (design, permits, fees) and financing costs
• Contingency: a budget for overruns, often 5% to 10% of construction costs
• Your equity and experience: how much you are putting in and any past building projects