Financing Your Custom Home Build in Toronto — 2026 Options

Progress Draw Construction Mortgages

This is the standard financing vehicle for custom builds. Instead of advancing a lump sum, the lender disburses funds in predetermined stages — called "draws" — as specific construction milestones are verified.

How it works: The lender bases the total loan on the projected appraised value of the completed home, not the value of the empty lot. During the construction phase (typically 12–18 months), you make interest-only payments on the funds that have been advanced so far, which keeps your monthly cash outflow manageable while the build is underway. Once construction is complete and the final occupancy permit is issued, the construction loan converts into a conventional mortgage.

Draw Schedule

Before each draw, the lender sends an independent appraiser to the site to verify that the milestone has been reached. A standard schedule looks like this:

Qualification requirements: Lenders typically require good credit (680+ score), a detailed set of architectural plans, a signed builder contract, and equity in the land (often 20–25% of the projected completion value). Major banks (RBC, TD, Scotiabank, BMO) and credit unions offer construction mortgage products, as do specialized private lenders.

Home Equity Line of Credit (HELOC)

If you own the lot outright or have substantial equity in your current primary residence, a HELOC provides highly flexible funding. You draw funds as needed to pay contractors, pay interest only on the outstanding balance, and repay at your own pace.

2026 rates: The prime lending rate at major Canadian banks sits at 4.45% as of early 2026. HELOC rates are variable, typically offered at prime plus a margin. You can access up to 65% of your property's appraised value through a standalone HELOC, or up to 80% when combined with a mortgage.

Fixed-rate option: Hybrid HELOC products (like the TD Home Equity FlexLine or RBC Homeline Plan) allow you to convert portions of your balance into fixed-rate segments with structured repayment, giving you budget predictability on a portion while keeping the rest flexible.

For unbiased guidance on home equity products, consult the Financial Consumer Agency of Canada.

Bridge Financing

Bridge loans cover the gap between needing funds for your new build and receiving proceeds from the sale of your current home. If you plan to sell your existing house to fund the final stages of construction, a bridge loan provides short-term capital (typically 90 days to 6 months) until your sale closes.

Qualification: You generally need a firm sale agreement on your existing home to qualify. Bridge loan rates are higher than conventional mortgage rates, reflecting the short-term, higher-risk nature of the product. Private lenders are the most common providers.

Tips Before You Commit

• Get pre-approval from a mortgage broker experienced in custom builds before you start design work — this establishes your budget ceiling
• Factor in HST (13%) on all construction costs; partial rebates are available (see Rebates & Tax Incentives)
• Lenders inspect progress before each draw, so choose a builder with an organized construction schedule that aligns with standard draw milestones
• If your mortgage is insured through CMHC, its rules may affect your borrowing capacity and qualification

How Our Payment Structure Aligns

Our milestone-based payment structure is designed to align directly with construction mortgage draw schedules. Each payment you make to us corresponds to verified completed work — the same milestones your lender's appraiser is evaluating. This synchronization protects both you and your lender. We can discuss your project scope and connect you with lending specialists who focus on Toronto custom home financing.

Learn more about our custom home building services.