Financing that follows the work.
A construction mortgage is generally used to finance a new build or substantial construction work. Unlike a conventional mortgage on a completed home, the lender evaluates both the property as it stands and the proposed project. Your plans, project budget, experience, financial position and repayment strategy can all matter.
Staged advances and progress inspections
Lenders may advance funds in stages tied to construction milestones, subject to inspection and lender terms. A lender may ask for updated reports, invoices, evidence of work completed or a valuation before releasing funds. There is no universal draw schedule.
The distinction between work completed and cash available is important. A draw may follow an inspection rather than precede the contractor’s expenses. Discuss how you will cover costs between advances, what conditions apply and how delays could affect your obligations.
Interest during construction
Interest may be based on amounts advanced, with payment arrangements defined by the lender’s agreement. Ask how interest is calculated and paid, which fees apply, and what an extension or delayed completion could mean. Do not assume interest only payments, automatic extensions or a fixed funding arrangement.
Completion and permanent financing
A completed project may be sold or refinanced into a permanent mortgage, depending on your plan. Permanent financing requires its own approval. Property value, market conditions, income and lending criteria can change before completion.
Covering a timing gap.
A bridge loan is short term financing intended to connect a current funding need with an identifiable repayment event. Bridge financing in Ontario can mean different things, so the type of gap should be clear from the outset.
Between selling and buying a property
If your purchase closes before sale proceeds are available, a lender may consider bridge financing to cover the gap. The lender will typically review the purchase and sale agreements, closing dates, existing mortgages and expected proceeds. A confirmed sale may be required; an unsold home presents a different financing question.
Between a project stage and permanent financing
A project may need short term financing before a sale or longer term mortgage can be completed. The lender will review the current property condition, security, timeline and credibility of the proposed exit. A bridge does not eliminate the need for a supportable repayment plan.
A broader project review.
Development financing in Toronto may involve land, infill projects or multi unit development. Lender review can extend beyond the borrower’s income to the project team, site, approvals, budget, marketability and expected repayment.
Early stage and construction ready projects are not the same risk. Financing availability may depend on how far planning and approvals have progressed. Meshesha can help organize the financing conversation; lawyers, architects, contractors and municipal authorities should advise on legal, zoning, permitting and construction matters.
Prepare for a useful conversation.
Start with your property, proposed scope, general budget, timeline and exit strategy. Our project information checklist outlines documents a lender may ask for.
Further reading
For regulatory context, see the Financial Services Regulatory Authority of Ontario’s mortgage consumer resources. External resources do not establish eligibility or terms for your project.