Construction Loan

Learn about construction loans in Canadian real estate — how they work, who uses them, and their role in development financing.

Construction Loan

July 11, 2025


What is a Construction Loan?

A construction loan is a short-term, interim financing option used to fund the building or major renovation of a property, with funds disbursed in stages as work progresses.

Why Construction Loans Matter in Real Estate

In Canadian real estate development, construction loans provide liquidity during the build phase and are typically replaced with permanent financing at completion.



Key features:
  • Interest-only payments during construction
  • Draw schedule tied to inspection milestones
  • Higher risk, higher interest rates



Understanding construction loans helps builders, developers, and lenders manage financing risk and cash flow.

Example of a Construction Loan in Action

The developer secured a construction loan to fund the phased build of a 20-unit townhouse project, with draws released after inspections.

Key Takeaways

  • Funds new construction or major renovation
  • Short-term, interest-only during build
  • Replaced by permanent loan at completion
  • Disbursed in stages tied to progress
  • Involves higher risk and lender oversight

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

More For You

Is Canada Entering A "Golden Era" For Investing In Seniors Housing?

Is Canada Entering A "Golden Era" For Investing In Seniors Housing?
Retirement home in Richmond, BC/Shutterstock

Alternative real estate investment firm Harrison Street Asset Management would have been one of the few investors looking to buy seniors housing in 2021, during the maelstrom of the pandemic. At the time, demand was low as operational costs soared, governments opened and closed retirement facilities, and residents became disproportionately vulnerable to contracting COVID-19, driving occupancy rates down.

But as Canada emerged from the pandemic, the narrative began to flip. The impending arrival of the nation's long-anticipated "silver tsunami" amid low supply stemming from a lack of seniors housing development during COVID-19, alongside other tailwinds like rising occupancy and declining costs, have transformed the seniors investment landscape, particularly as it relates to independent seniors living.

Keep ReadingShow less

Block Of Eglinton Ave W, Office Of TAS Sells To Skye Capital For $20.85M

Block Of Eglinton Ave W, Office Of TAS Sells To Skye Capital For $20.85M
453, 465, 481, 483, and 491 Eglinton Avenue West/TD Cornerstone Realty Inc.

A string of commercial properties along Eglinton Avenue West in the Forest Hill neighbourhood of Toronto has sold after being on the market for around nine months. This is according to a transaction announcement provided to STOREYS by TD Cornerstone Realty Inc., the firm that brokered the sale. The block of buildings at 453, 465, 481, 483, and 491 Eglinton Avenue West was offloaded to Skye Capital Partners Ltd. for a collective $20,850,000.

Records obtained from Altus Group show that 453 Eglinton Avenue West was sold for $4,750,000 (at a rate of $634 per sq. ft), 465 and 481 Eglinton Avenue West were sold for $6,850,000 (at a rate of $622 psf) and 483 and 491 Eglinton Avenue West were sold for $9,250,000 (at a rate of $236 psf). All three transactions are dated August 14, 2025.

Keep ReadingShow less

Steeles Development Site Listed With Approvals For 40, 44 Storeys

Steeles Development Site Listed With Approvals For 40, 44 Storeys
36–48 Steeles and 37-49 Highland Park/Arcadis via Colliers

A Zonix Group development site has hit the market for an unlisted price, offering developers the opportunity to erect a high-density, transit-oriented residential development at the border of Toronto and Markham. The sale of the site is being represented by Jeremiah Shamess and Matthew Soper of Private Capital Investment Group at Colliers and it currently has approvals in place for a 40- and 44-storey complex set to deliver 1,060 residential units, and potentially more.

Located at 36-48 Steeles Avenue East and 37-49 Highland Park Boulevard, the site spans 2.3 acres and is bounded by Steeles Avenue in the south, Dudley Avenue in the west, Highland Park Boulevard in the north, and single-detached dwellings in the east. Currently the site is occupied by 14 single-family homes that would be demolished upon redevelopment of the land.

Keep ReadingShow less

BC Sets 2026 Rent Increase Cap At 2.3%, Tying It To Inflation

​BC Premier David Eby at the swearing-in ceremony for his updated cabinet in July.

BC Premier David Eby at the swearing-in ceremony for his updated cabinet in July. / Government of British Columbia

On Tuesday, the Government of British Columbia announced that it will again be tying the annual rent increase cap to inflation, resulting in a maximum allowable rent increase of 2.3% in 2026.

"B.C. is an extraordinary place, but with economic uncertainty and rising costs, people are struggling to find a place to live that fits in their budget," said Minister of Housing and Municipal Affairs Christine Boyle, who was appointed to the position during this summer's cabinet shuffle. "We're continuing to cap rent increases, linking them to inflation, to reduce housing costs for seniors, families and individuals, protecting them from unfair hikes. At the same time, this rent increase allows landlords to invest in their properties to keep rental homes on the market."

Keep ReadingShow less

Withering GTA New Home Sales Have Now ‘Eclipsed’ The ‘90s Downturn

Withering GTA New Home Sales Have Now ‘Eclipsed’ The ‘90s Downturn
Shutterstock

The housing slump that’s jarred market stakeholders over the past three years is often compared to that of the 1990s in its pattern and severity, but in the Greater Toronto Area’s (GTA) new home market specifically, it seems conditions are now even a cut below that famous downturn.

The Building Industry and Land Development Association (BILD) said Wednesday that GTA new home sales “remain exceedingly low, eclipsing the 1990s downturn, with July sales remaining at low levels not seen in decades.”

Keep ReadingShow less

Lawrence Park Estate Invites You To Live In Sleek Luxury

Lawrence Park Estate Invites You To Live In Sleek Luxury

When it comes to high-calibre living in Toronto, Lawrence Park has long held its place among the city’s most coveted neighbourhoods.

Nestled on a tree-lined street, 142 Buckingham Avenue presents as a newly completed custom residence that embodies everything the enclave is known for: timeless architecture, intelligent design, and a serene sense of retreat within reach of the city’s best schools, green spaces, and social institutions.

Keep ReadingShow less

Long-Time Royal LePage COO Carolyn Cheng Retiring

​Carolyn Cheng, Chief Operating Officer of Royal LePage
Carolyn Cheng, Chief Operating Officer of Royal LePage

After more than nine years in the role, and over 20 years in total with the company, STOREYS has learned that Royal LePage Chief Operating Officer Carolyn Cheng is retiring at the end of November.

Cheng stepped into the newly created role of COO in May 2016, and over the next near-decade she was tasked with leading the broker and agent services team, and contributing to the profitability and potential of the company through the development of products and services.

Keep ReadingShow less

Former Ontario Association Of Architects Headquarters To Anchor 31-Storey Rental

Former Ontario Association Of Architects Headquarters To Anchor 31-Storey Rental
Rendering of 50 Park Road from east side of Park Road, looking southwest/BDP Quadrangle

Built in 1954 and featuring glass and brick modernist design by Toronto-based architectural firm NORR (previously John B. Parkin Associates), the first permanent headquarters of the Ontario Association of Architects exists today as a two-storey commercial building. In addition, for a stint, the property at 50 Park Road in Midtown served as the offices of architecture, landscape architecture, and urban design firm DTAH.

And those are just the first few chapters of its story. The next could see it intensified with a 31-storey purpose-built rental, proposed to be incorporated into the site through adaptive reuse. The planned tower comes courtesy of Helberg Properties Limited and Peberg Corporation, and would also cover the adjacent addresses at 38 and 40 Park Road, currently occupied by a three-and-a-half-storey triplex and an aging eight-storey rental apartment.

Keep ReadingShow less
Privacy PolicyAbout UsTerms of UseAdvertise with UsJobsContact UsRSS Feed
2025 © STOREYS Publishing Inc. | All Rights Reserved