Construction (Progress Draw) Mortgage vs. Completion Mortgage – What’s the Difference?

If you’re building a new home in Canada, you’ll likely come across two types of financing options: a construction or “progress draw” mortgage and a completion mortgage. While both help you achieve the same goal—moving into your brand-new home—the way the funds are advanced and the approval process work quite differently.

Progress Draw Mortgage
With a progress draw (or construction) mortgage, funds are advanced to the builder in stages as the home is built. Typically, draws happen at key milestones: after the foundation, at lock-up (when doors and windows are in), and at completion.

• You typically need a down payment of 20%-30% on the lot and a total of 20%-25% of the total build cost (lot and build) prior to the start of the build. You will typically have to sell your existing home first to have the equity available and to reduce your monthly expenses. 
• You begin making interest-only payments on the funds as they’re advanced.
• Inspections are required at each stage to confirm progress before more money is released.
• This option is common if you’re working with a custom builder or on a self-build project.

Completion Mortgage
With a completion mortgage, the lender advances the full mortgage amount only when the home is 100% finished and ready for possession.

• You don’t make any payments until the home is complete and can often put down as little as 5% and can continue to live in your existing home while the build is taking place.
• This is the more common option when buying from a larger builder or developer in a subdivision or condo project.
• The builder carries the financing during construction, and you simply take over at the end.

Which One is Right for You?
If you’re building a custom home and your builder requires funds along the way, a progress draw mortgage is likely necessary. If you’re purchasing from a builder who can finance construction themselves, a completion mortgage is usually simpler.
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Both options come with unique considerations—such as interest costs, inspection requirements, land transfer tax implications,and down payment timing. That’s where working with a mortgage broker helps. I can review your plans, walk you through the financing process, and make sure you have the right mortgage solution for your new build.