What is a Construction Mortgage?
A construction mortgage provides staged financing for building or substantially renovating a property. Funds are released in multiple draws as construction milestones are completed and verified by an inspector or appraiser. During construction, borrowers make interest-only payments on the amounts drawn, and once the project is complete, the mortgage converts to a standard long-term loan with regular principal and interest payments.
Typical Construction Draw Structure (2025)
- Land Purchase / Foundation Stage — 15–20%
- Framing / Lock-Up Stage — 25–30%
- Interior / Drywall Stage — 25–30%
- Finishing & Completion — 20–25%
Each draw requires a progress inspection by a lender-approved appraiser. Construction mortgage terms generally range from 6 to 18 months, after which the loan converts to a conventional mortgage.
Eligibility and Requirements (Alberta 2025)
- Minimum down payment or equity: 20–25% of total project cost (30% for self-builds).
- Licensed, insured builder or general contractor (self-builds accepted under strict oversight).
- Comprehensive budget and timeline, including building permits, labour, and materials.
- Appraised ‘as-completed’ property value confirming project feasibility.
- Proof of income and credit to qualify for final take-out mortgage.
Local Market Insights (Verified 2025 Data)
Typical detached home construction cost averages $250–$325 per sq. ft.
Draw inspection fees
$250–$500 per stage, depending on lender.
Land Titles registration fees
Alberta charges a flat $50 + $5 per $5,000 of property or mortgage value
Why Choose a Construction Mortgage in Alberta
- Finance new builds or large-scale renovations on owned or newly purchased land.
- Access funds progressively instead of upfront lump-sum borrowing.
- Combine with bridge or take-out mortgage options for seamless conversion.
- Benefit from interest-only payments during construction to manage cash flow.
Risks and Mitigation Strategies
- Budget overruns: Keep a contingency of 10–15% for unexpected costs.
- Permitting delays: Obtain all municipal approvals before applying for the first draw.
- Contractor reliability: Work with licensed, experienced builders.
- Rate fluctuations: Secure an early rate-lock or conversion guarantee for your end mortgage.
How Sandhu & Sran Mortgages Helps You
- Assess project viability and recommend construction-friendly lenders.
- Structure draw schedules tailored to your build timeline.
- Coordinate inspections, appraisals, and documentation to ensure timely fund releases.
- Plan long-term financing strategy for smooth conversion to a standard mortgage after completion.