Building a new home in Edmonton or on an acreage outside the city? A construction mortgage works very differently from a regular home purchase loan — money is released in stages as the build progresses, and the property securing the loan doesn’t fully exist yet. Anh Lang of TMG Mortgages (780-446-1271) walks you through how construction financing works in Alberta in general terms, so you can plan your build with confidence.
How Construction Mortgages Differ from Regular Mortgages
With a standard mortgage, the lender funds the full amount at closing against a finished home. With construction financing, the lender advances money in stages tied to completed work — and each advance typically requires an inspection or progress report before the next funds are released. You generally pay interest only on the amounts advanced so far, with the full mortgage taking shape as the build completes.
Progress-Draw vs. Completion Mortgages
The two main structures: progress-draw (draw) mortgages release funds in several installments — typically at foundation, framing/lock-up, and completion stages — with inspections before each draw. Completion mortgages fund the full amount when the home is finished, which means you (or your builder financing) carry the construction costs until then. Draw mortgages are the more common route for custom builds; completion mortgages suit buyers purchasing a builder’s spec or pre-sale home.
Building on Your Own Lot vs. Buying a Builder Home
If you already own the lot, its value (minus any owing on it) generally counts toward your equity in the project — a real advantage. If you’re buying the lot as part of the project, the land purchase and construction are financed together. Buying a builder home (a new build from a developer) is simpler: it’s closer to a regular purchase, often with a completion mortgage and the builder carrying construction risk.
Draw Schedules and Inspections
Your lender sets a draw schedule — agreed milestones at which funds are released. Before each advance, the lender typically orders an inspection or appraisal confirming the work is complete and the value supports the next draw. Delays, cost overruns, or work that doesn’t match the plans can hold up a draw, so a realistic budget with a contingency cushion matters enormously.
Down Payment Expectations
Construction lending is higher-risk for lenders, so down payment expectations are generally higher than for a standard purchase — your equity in the land plus cash invested. Lenders want to see you have real skin in the game before they start advancing funds against an unfinished property. Anh can explain in general terms what lenders look for given your specific project.
Acreage and Rural Construction Notes
Building on acreage around Edmonton adds layers: wells and septic systems, longer servicing runs, access roads, and sometimes slower resale markets that make lenders more cautious. Rural appraisals can also be trickier with fewer comparable sales. None of this makes financing impossible — it just means planning earlier and choosing a lender comfortable with rural construction.
Frequently Asked Questions
Can I get a construction mortgage if I already own the lot?
Yes — and owning the lot outright (or with equity in it) strengthens your application, since the land value counts toward your equity in the project.
Do I pay interest during construction?
Generally you pay interest only on the amounts drawn so far, so payments start small and grow as construction advances. Once the build is complete, the loan typically converts to a regular mortgage.
What happens if construction goes over budget?
Cost overruns are your responsibility — the lender won’t automatically increase the loan. This is why lenders like seeing a contingency buffer in your budget, and why fixed-price builder contracts are reassuring to everyone.
Can I act as my own general contractor?
Some lenders allow experienced owner-builders; many prefer (or require) a licensed general contractor with a fixed-price contract. Lender policies vary, so this is worth confirming early.
How long does construction financing take to arrange?
Longer than a standard mortgage — lenders review plans, budgets, builder contracts, and appraisals of the finished value. Starting the financing conversation before you break ground (ideally months before) keeps your build on schedule.
Apply Now — Anh Lang (TMG Mortgages, 780-446-1271) will review your application and call you back.
Anh Lang — TMG Mortgages — 780-446-1271 — price@ourhouseprice.ca — Part of the Our House Price Real Estate Team