At Contempo one of the most common questions we hear from clients planning their forever home is: “Can I get a mortgage to build a custom home in Toronto?” The short answer is yes. But the process is far more detailed than a traditional mortgage—and understanding those details can set your project up for long-term success.
In this article, we’ll explain how construction mortgages work, the different types available, what you’ll need to qualify, and how we assist clients in navigating every step from land purchase to occupancy.
What Is a Construction Mortgage?
A construction mortgage is a specialized loan designed for people who want to build their home from the ground up. It’s very different from a standard home loan. Rather than releasing the full amount at once, construction mortgages are paid out in intervals called draws. These draws correspond with the progress of the home build—such as after the foundation is poured or when the framing is complete.
Each draw is reviewed by an inspector or appraiser to ensure the work is done before the next installment is released. Once the home is completed and passes final inspections, the construction mortgage converts into a standard mortgage, where you begin making regular principal and interest payments.
This structure gives lenders confidence that the funds are being used correctly, and it gives you financial flexibility during the build.
Types of Construction Mortgages
Progress Draw Mortgage
The most common type of construction mortgage, progress draw mortgages release funds in stages:
- After the foundation is complete
- After framing and roofing are finished
- After mechanical and interior systems are installed (like electrical and drywall)
- At final completion
With each phase, an inspector verifies that the work aligns with the approved budget and timeline. Most of our clients at Contempo opt for this route because it fits well with how we schedule and execute our builds.
Completion Mortgage
A completion mortgage releases all funds after the home is fully built. This option requires that you pay all costs during construction—out of pocket or through separate financing—and then convert everything into a single mortgage after occupancy.
While rare, it can be beneficial for homeowners who already own their land and have the financial capacity to self-fund construction.
Self-Build Mortgage
For those taking a hands-on approach without a general contractor, self-build mortgages may be an option. However, lenders view them as higher risk. To qualify, you’ll need to prove significant construction experience and submit a highly detailed plan with timelines, contingencies, and trades lists.
Do You Qualify? Eligibility Requirements in Ontario
Credit Score
Most lenders look for a credit score of 680 or above, though some may accept slightly lower scores depending on your financial profile and builder’s track record.
Down Payment
Construction loans typically require a higher down payment than resale home mortgages. In Ontario, expect to provide 20–25% of the total build cost, including the land. If you already own the land, its value may count toward the equity requirement.
Comprehensive Building Plan
To secure approval, you’ll need a complete construction proposal including:
- Architectural drawings
- Construction timeline
- Budget and materials breakdown
- Builder contract
- Relevant permits and zoning approvals
Our in-house design team at Contempo helps clients prepare this entire package, ensuring everything aligns with municipal requirements and lender expectations.
Builder Requirements
Most lenders will only finance builds managed by Tarion-registered builders. As a trusted custom home builder in Toronto, we meet all licensing and warranty requirements, making us an ideal partner for construction mortgage applicants.
How the Process Works
- Pre-Approval – Submit your complete build plan, financial documents, and builder agreement to the lender.
- Appraisal – A certified appraiser evaluates the current land value and the projected value of the completed home.
- Draw Schedule – A draw schedule is established based on specific project milestones. Each draw will be tied to an inspection or verification.
- Inspections and Funding – Inspectors visit the site at each milestone to confirm work completion before releasing the next phase of funds.
- Mortgage Conversion – Once construction wraps up and you receive your occupancy permit, your loan converts to a standard mortgage with monthly payments.
As your builder, we handle much of the coordination—ensuring smooth communication between you, your lender, and your inspectors.
Where Can You Get a Construction Mortgage in Ontario?
Over the years, we’ve built strong relationships with many lenders who understand the custom home process. These include:
- Major Banks: TD Canada Trust, RBC, Scotiabank, BMO
- Credit Unions: Meridian, DUCA, Alterna Savings
- Independent Mortgage Brokers: Offering access to multiple lenders and competitive rates
- Private Lenders: Often more flexible but may charge higher interest rates
We’re happy to recommend trusted financial professionals familiar with our build process. Their familiarity with our approach often streamlines approvals and reduces delays.
Pros and Cons of Using a Construction Mortgage
Advantages:
- Full control over layout, finishes, and features
- Financing is tailored to project stages, easing cash flow
- Only pay interest during the construction phase
- Convert to a traditional mortgage when done
Challenges:
- Requires upfront planning and coordination
- More paperwork than buying a pre-built home
- Higher initial costs due to larger down payments
- Unexpected site issues can affect timeline and budget
Tips for Getting Approved
We guide our clients through this process to ensure nothing falls through the cracks. Here are some tips:
- Choose a licensed and reputable builder to increase lender confidence
- Stay organized with all documentation, including permits and insurance
- Maintain a financial cushion of 10–15% for surprises
- Work with a broker if you’re unsure which lender best suits your needs
By following these steps and working with our experienced team, you’ll improve your chances of a smooth approval and funding process.
Is It the Right Choice for You?
Building a custom home isn’t just a financial decision—it’s a lifestyle investment. If you want something designed around how you live, entertain, and grow with your family, there’s no better solution than a custom build.
A construction mortgage can help you bring that dream to life, as long as you meet the requirements and work with a knowledgeable team. At Contempo Building Corp., we’ve helped clients across the GTA go from empty lot to keys in hand—and we’re ready to help you do the same.
Final Thoughts
Yes—you can get a mortgage to build a custom home in Ontario. With the right guidance, clear financial planning, and a trusted builder, the process becomes far more manageable than many expect.
If you’re considering a custom home, reach out to us. Let’s talk design, permits, financing—and how we can help turn your vision into reality.