Construction Draw Mortgages, Explained

Building a new home is not financed like buying a finished one. A construction draw mortgage releases your money in stages as the build hits each milestone, so the lender is only ever advancing funds against work that is actually in the ground. Here is how the draws, inspections and holdbacks really work in Alberta.

Quick answer: A construction draw mortgage (or progress-draw mortgage) funds a new build in stages instead of one lump sum. The lender advances money in “draws” as construction reaches set milestones — foundation, lock-up, drywall, completion — with an inspection or appraisal confirming each stage before the money is released. You usually pay interest only on the funds advanced so far, so payments start small and grow as the home is built. At completion it converts to a normal mortgage.

typical draws over the build

Interest-only

on funds advanced during construction

Each draw

released after inspection

~10%

builders’ lien holdback in Alberta

How a progress-draw mortgage actually works

Instead of handing over the full loan on closing day, the lender approves the total amount up front and then releases it in chunks tied to how far along the build is. Before each draw, a lender-appointed appraiser or inspector visits the site and confirms the work is genuinely complete to that stage. That protects the lender — and you — from paying for work that has not been done.

Because you only draw what you need as you go, you are charged interest only on the money advanced so far. Your first payment on the foundation draw is small; by the final draw you are carrying interest on close to the full balance. Once the home is finished and the occupancy permit is issued, the construction loan converts into a regular mortgage with normal principal-and-interest payments.

A typical Alberta draw schedule

Draw	Stage	Roughly complete
Draw 1	Foundation — permits, excavation, concrete, basement walls	~15%
Draw 2	Lock-up — framing, roof, exterior walls, windows and doors	~35%
Draw 3	Interior — insulation, electrical and plumbing rough-in, drywall	~65%
Draw 4	Completion — finishing, appliances, grading and landscaping	~97%

Percentages and the number of draws vary by lender and by builder contract. Some files run three draws, some run five. The idea is the same: money follows progress.

Progress draw vs. completion mortgage

Not every new build needs a draw mortgage. If you buy from a large builder who finances the construction themselves, you may only need a completion mortgage — you sign a purchase contract, the builder carries the cost of building, and your mortgage funds in one shot on the possession date, just like a resale purchase. A progress-draw mortgage is for when you (or your custom builder) need the financing to flow during construction, because nobody else is fronting the money. Knowing which one your situation calls for is the first thing to sort out.

Holdbacks and the builder’s role

Alberta’s builders’ lien rules require a holdback — typically around 10% of each payment to contractors — to be kept back for a set period after work is done. That holdback protects against unpaid trades filing liens on your title. In practice it means the final draw is not fully released until the holdback period clears and the title is confirmed clean. Your builder’s contract, invoices and lien-holdback handling all feed into whether each draw gets approved on time, which is why a disorganized builder can stall your financing even when the house looks finished.

Why these files need a broker who knows construction lenders

Draw mortgages are a specialty. Many big banks either do not offer true progress-draw financing or make it painful, and the lenders who do it well each have their own draw schedules, inspection fees and cost-to-complete rules. Getting this wrong means a draw arrives late and your trades walk off the site. A broker who places construction files regularly knows which lender fits your build, your down payment and your timeline.

How a Calgary mortgage broker helps

Matches your build to a lender that actually does draw mortgages well — and does them in Alberta.
Sets up a draw schedule that lines up with how your builder invoices and pays trades.
Explains the interest-only carrying cost so you can budget the build without surprises.
Coordinates appraisals, inspections and the lien holdback so draws land on time.
It’s free, with no credit hit to start and no obligation.

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Frequently asked questions

What is a construction draw mortgage?

It is a mortgage for building a new home where the lender releases the loan in stages, called draws, as construction reaches set milestones like foundation, lock-up, drywall and completion. An inspection or appraisal confirms each stage before the money is advanced, and you pay interest only on the funds released so far.

How many draws are there and when do they happen?

Most Alberta builds use about four draws, tied to roughly 15% complete (foundation), 35% (lock-up), 65% (interior rough-in) and 97% (completion). Some lenders use three or five. Each draw is released only after a site inspection or appraisal confirms that stage is actually done.

Do I pay interest on the whole mortgage during construction?

No. During the build you pay interest only on the money that has been advanced so far, not the full approved amount. Payments start small on the first draw and grow as more funds are released. Once the home is complete and occupancy is granted, it converts to a normal mortgage with principal-and-interest payments.

What is the difference between a progress-draw and a completion mortgage?

A progress-draw mortgage releases money to you during construction because you or your custom builder need the financing to flow as the home goes up. A completion mortgage funds in one lump sum on possession day and is used when the builder finances the construction themselves — you only pay once the home is finished.

What is a holdback and why does it matter?

Alberta’s builders’ lien rules require a holdback of about 10% of payments to contractors, kept back for a set period so unpaid trades cannot lien your title. It means the final draw is not fully released until the holdback period clears and the title is confirmed clean, so it affects when you get your last funds.

Can I get a construction draw mortgage from any bank?

No. Many major banks either do not offer true progress-draw financing or handle it poorly. The lenders who do it well each have their own draw schedules, inspection fees and cost-to-complete rules, so it pays to work with a broker who places construction files regularly and knows which lender fits your build.

Building in Alberta? Let’s structure the draws right.

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This article is general information, not financial, mortgage or legal advice. Rates, programs and rules change and depend on approval. Please speak with a licensed mortgage professional about your situation. Mortgages for Less with INDI Mortgage.