Progress Draw Mortgage
A progress draw mortgage releases funds in stages during construction, with inspections verifying completion before each advance.
September 30, 2025
What is a Progress Draw Mortgage?
A progress draw mortgage is a financing arrangement commonly used in new construction where the lender advances funds in stages as the building project progresses. Inspections are conducted at each stage to confirm completion before the next draw is released.
Why a Progress Draw Mortgage Matters in Real Estate
Progress draw mortgages matter in real estate because they provide builders and homeowners with access to funds throughout construction without needing the full loan upfront. Lenders reduce risk by releasing funds only after work is verified. Borrowers must carefully plan cash flow to match construction timelines.
Example of a Progress Draw Mortgage in Action
A custom home builder secures a $600,000 progress draw mortgage. The lender advances 20% when the foundation is complete, 30% at framing, 30% at lock-up, and the remaining 20% at completion after final inspection.
Key Takeaways
- Funds advanced in stages during construction.
- Inspections required before each draw.
- Reduces lender risk and ensures work completion.
- Requires detailed planning of cash flow.
- Common in custom builds and large renovations.
Related Terms
- Construction Financing
- Holdback
- Inspection
- Builder’s Mortgage
- Draw Schedule
6525 Mississauga Road and its surrounding context. (RBC Capital Markets & CBRE)
Property details for 6525 Mississauga Road. (RBC Capital Markets & CBRE)
National average resale-price growth and housing-starts growth, smoothed over three months. The comparison illustrates the cycle; it does not establish how much a price change causes construction to change.
Trailing 12-month starts in centres of 50,000 or more remove the usual monthly seasonality. Ownership combines the homeowner and condominium categories; rental is shown separately.
Six-month averages of provincial starts, expressed at annual rates. The smoothing reduces the influence of individual apartment projects.
The same August benchmark compared with two different starting points. Three-month changes are not annualized.
Average sale prices show the difference in purchase costs across markets. They do not measure affordability relative to local incomes or construction costs.
Newfoundland and Labrador remains above its pre-pandemic sales pattern, but August activity was below last year. Historical lines retain their original release vintages.
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)