Building Your Dream Home? Deconstructing Construction Mortgages

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By: Karyn Silliker, Meridian’s Aylmer Branch Manager

Whether you’re building your new home on a fresh plot of land or undergoing a major renovation or addition to an existing home, a construction mortgage may help address key home financing issues that arise with major construction projects.


Unlike builder mortgages, which fund the purchase of a newly built home from a builder, a construction mortgage funnels multiple draws of money over stages of the home’s construction. More importantly, throughout the construction, the mortgage consists of interest-only payments until the property is 100 per cent complete.


Here are some key elements to keep in mind when considering a construction mortgage:


  • Understand the time and costs associated with your construction: When considering a construction mortgage it is important to work with your builder to get a realistic sense of the costs and timelines associated with your home construction. As unexpected costs often occur in construction projects, it’s highly recommended that you allot an additional 15% for contingencies.


  • Understand how the funds will be advanced: While many lenders advance funds (this is known as draws) for a maximum of three instalments during the construction, Meridian offers unlimited draws on its construction mortgages. It’s important to note that once a request for a draw is made, the construction completed so far must be inspected by an appraiser.


  • Understand the process for applying for a construction mortgage: Unlike traditional mortgages, construction mortgages take more time to review and approve and require more than just a recent notice of assessment. Many financial institutions require construction permits, blueprints, builder cost/contracts and land deeds to start the adjudication process.


To learn more about construction mortgages visit or come and visit us at Meridian’s Aylmer branch located at 36 Talbot Street West.