The questions worth asking before you build.

A construction mortgage is generally structured around the work and financing needs of a building project. Funds may be advanced in stages as work progresses, subject to inspections and lender terms. A bridge loan is short term financing intended to cover a timing gap, such as closing on a purchase before receiving sale proceeds, or moving a project toward permanent financing. The appropriate structure depends on the property, project, repayment plan and lender underwriting.

A lender may release funds in stages tied to construction milestones. Before a draw, the lender may require a progress inspection, an updated valuation, invoices or other documentation. The milestones, conditions, available amounts and treatment of holdbacks vary by lender and project. A draw is not automatic; confirm the written funding conditions and allow for processing time before committing to payments.

Teardown and rebuild projects may be considered by some lenders, depending on the property, proposed plans, permits, budget, borrower qualifications and repayment strategy. Demolition can change the value and condition of a lender’s security. Discuss financing before beginning demolition or assuming an existing mortgage permits the work. Your lawyer, contractor and municipal authorities should advise on the project specific requirements.

An exit strategy explains how short term or construction financing will be repaid. It may involve selling the completed property, refinancing into a permanent mortgage or another supportable source of repayment. Lenders assess whether the plan is realistic under the proposed timing, property value and borrower circumstances. A planned refinance is not an approval for future financing.

Some lenders may consider a self build, while others may require an experienced or approved builder. The review can include your experience, contractor arrangements, plans, budget, permits, equity and ability to carry the project. Self-build mortgage options in Toronto are lender and project specific; a consultation can help identify what information to prepare.

For sale to purchase bridge financing, a lender will often want evidence of an accepted sale and clear closing dates, and may require that sale conditions have been satisfied. Requirements vary. An unsold property is not the same as a timing gap backed by a confirmed sale, and may need a different review. Do not assume bridge financing will be available before a lender confirms its conditions.

Interest is often associated with the amounts advanced rather than the entire proposed facility, but payment arrangements and fees depend on the lender and agreement. Some structures may require payments during construction; others may make different arrangements. Ask for a written explanation of interest, fees, payment obligations and what happens if the project runs longer than expected.

Major additions and structural renovations may require a different financing approach from a standard home improvement loan. Lenders may review the existing mortgage, current and proposed property value, project scope, permits, contractor details, budget and repayment plan. Available options depend on the scale of the work and lender underwriting.

Ask about interest, lender and brokerage fees, appraisal and inspection costs, legal costs, holdbacks, repayment conditions and any applicable charges for early repayment or extensions. Discuss potential delays, cost overruns and changes to the exit strategy. Your actual obligations are established by the lender’s commitment and legal documents, not a website summary.

Meshesha Robel is a licensed mortgage intermediary who arranges financing through third party lenders, is not a direct lender, and all financing is subject to lender approval and underwriting. A consultation is an opportunity to review the project and possible financing paths; it is not a credit approval, financing commitment or guarantee.