How Construction Mortgages Work in Canada

Construction mortgages finance the building of a new home or major renovation. They’re released in stages and require tight planning, inspections, and lender approval.

Introduction

Unlike traditional mortgages, construction financing is released in draws as your project progresses. It’s designed to fund land acquisition, materials, and labour in stages, making it essential to plan carefully and work with professionals.

Construction mortgages are usually structured in 3 to 5 “draws”:
Lenders release funds incrementally: first for land purchase, then for foundation, lock-up, and completion. Each stage must be verified by an appraiser before the next draw is approved. This helps ensure the money is actually going toward the build and reduces risk.
You’ll need detailed plans, permits, and a construction contract upfront:
Lenders require architectural drawings, zoning approvals, building permits, and a fixed-price contract or cost-to-complete estimate. This documentation ensures the project is viable, budgeted correctly, and completed within guidelines.
Construction mortgages typically charge interest-only payments during the build:
Since you’re not occupying the home during construction, you pay only the interest on the drawn amount. Full mortgage payments begin once the home is complete and the loan converts to a traditional mortgage.
Not all lenders offer construction financing, and rules vary widely:
Some lenders require the home to be fully built before any funds are released (a “completion mortgage”), while others are comfortable with progress-draw structures. Working with a broker who understands these nuances is critical.
You’ll need to cover soft costs and overruns out-of-pocket:
Lenders rarely finance architectural fees, permits, and landscaping. Any cost overruns or upgrades beyond the original plan are your responsibility, and must be funded from your own savings or a line of credit.

Conclusion

Construction mortgages are a powerful tool for building your dream home, but they require careful planning, upfront documentation, and milestone-based approvals. Understanding the process helps prevent delays, cost overruns, and financing shortfalls.

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Private Mortgages in Canada: Risks and Rewards

Private mortgages provide access to financing when traditional lenders say no. They’re fast, flexible, and expensive, and must be used with caution.

Introduction

Private mortgages are offered by individuals or companies outside of regulated banks and credit unions. They’re often used by borrowers with bruised credit, complex income, or urgent timelines. But higher rates and fees mean they’re best suited for short-term use.

Private mortgages are asset-based, not income-based:
Approval is largely based on the property’s equity and marketability, not your credit score or income. As long as there’s sufficient equity (often 20%–35% minimum), private lenders will consider your application, even if banks won’t.
Interest rates are significantly higher than conventional mortgages:
Rates typically range from 7% to 12% or more, depending on the risk profile. On top of this, lender and broker fees are often deducted from the mortgage proceeds, adding to the effective cost. This makes private loans expensive over time.
Terms are short, usually 6 to 24 months:
Private mortgages are not long-term financing solutions. The goal is to “bridge” to better credit, income stability, or a property sale. Extensions may be possible, but they come at a cost, and some lenders charge renewal fees.
Repayment options are interest-only, and payments are often non-negotiable:
Borrowers must make monthly interest payments, but the principal is repaid at the end of the term. Failure to repay can result in legal action, including foreclosure, so having an exit strategy is non-negotiable.
Private lending is lightly regulated, due diligence is critical:
Not all private lenders are transparent or reputable. You must review the mortgage commitment, penalty clauses, and renewal terms in detail. A trusted broker or lawyer is essential to protect your interests.

Conclusion

Private mortgages can be a lifeline when traditional lending isn’t an option, but they’re not for the faint of heart. Used properly and temporarily, they offer flexibility. Used poorly, they can lead to financial distress.

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Understanding A-Lenders, B-Lenders, and MICs in Canada

Canada’s mortgage market includes three key lender tiers: A-lenders (banks), B-lenders (alternative), and MICs (Mortgage Investment Corporations). Each has different rates, rules, and flexibility.

Introduction

Not all mortgages are created equal, and neither are lenders. Understanding how A-lenders, B-lenders, and MICs operate helps you choose the best fit for your credit, income, and property profile.

A-lenders are traditional banks and credit unions offering the best rates:
These lenders cater to borrowers with strong credit (usually 680+), consistent income, and low debt levels. They offer CMHC-insured and conventional mortgages with competitive rates and full-feature products, but limited flexibility for non-standard situations.
B-lenders are alternative institutions serving self-employed or credit-challenged borrowers:
B-lenders offer more flexibility for those with high debt ratios, recent credit issues, or variable income. Rates are typically 1%–2% higher than A-lenders, and the mortgages may come with fees. They’re a smart option for borrowers in transition.
MICs (Mortgage Investment Corporations) are private lending pools:
MICs lend to higher-risk borrowers using pooled investor funds. They typically require 20%–30% down and charge higher rates (8%–12%). MICs are less regulated and offer faster approvals, but the loan terms are strict and short-term.
Each tier has different underwriting rules:
A-lenders follow federal regulations (including stress testing), while B-lenders and MICs use internal guidelines. This means you might be declined by a bank and approved by a MIC within 24 hours, with different expectations on rates and payments.
You can graduate between tiers over time:
Many borrowers use a B-lender or MIC as a stepping stone, then move to an A-lender once income or credit improves. Planning your financing journey with future tiers in mind is key to long-term mortgage success.

Conclusion

A-lenders, B-lenders, and MICs each serve a different borrower profile. Knowing where you fit helps you get approved, save money, and access the right mortgage solution for your needs.

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Alternative Mortgage Lending in Canada: Your Options

When banks say no, alternative lenders fill the gap. These include B-lenders, MICs, private lenders, and credit unions, each with their own rules.

Introduction

The mortgage landscape in Canada is broader than just big banks. If your application doesn’t fit traditional guidelines, there’s a growing universe of alternative lenders offering solutions. Understanding who they are and how they work is essential.

Credit unions often offer flexible terms with community-driven service:
These provincially regulated lenders may approve mortgages outside federal stress test rules. They’re especially helpful for rural properties, non-traditional income, or first-time buyers with community ties. Rates are competitive, and customer service is often more personal.
Monoline lenders specialize in mortgages only, no retail banking:
These institutions offer extremely competitive rates and flexible terms, especially through mortgage brokers. Though not “alternative” in the traditional sense, they’re often more accommodating than the big banks and fly under the radar for most borrowers.
B-lenders help borrowers with bruised credit or non-conforming income:
Whether you’re self-employed, recently divorced, or recovering from missed payments, B-lenders provide insured and uninsured mortgages with moderate premiums. They offer a structured path back to A-lending status with responsible repayment.
MICs and private lenders fund mortgages that no one else will:
These are last-resort or bridge solutions with higher rates, shorter terms, and stricter repayment terms. While they serve a purpose, they should be part of a well-defined exit strategy, never a long-term plan.
Alternative lending is about matching the right lender to the right borrower:
There’s no one-size-fits-all approach. What matters most is understanding the pros and cons of each option, and how it fits your short- and long-term financial goals.

Conclusion

Alternative lending opens doors that banks can’t, but it requires careful planning, honest assessment, and professional guidance. When used wisely, it can be a stepping stone to financial recovery or growth.

Still have Questions? Book a free call with Malcolm the Mortgage Guy

What to Do If Your Mortgage Application Is Declined

Being declined for a mortgage is stressful, but not the end of the road. Understanding why it happened and what steps to take next is key to getting back on track.

Introduction

Mortgage declines happen more often than you think, and for many reasons. Whether it’s credit, income, property issues, or documentation gaps, there’s always a path forward. What matters is how quickly and strategically you respond.

Ask your lender or broker for a detailed explanation:
Mortgage declines often come with vague answers. Push for specifics, was it the debt ratio, credit score, or property type? Understanding the “why” gives you a clear target to fix and improves your chances on the next application.
Check your credit report for errors or red flags:
Many applications fail due to undisclosed collections, incorrect balances, or outdated information. Pull your report from Equifax or TransUnion and dispute any mistakes immediately. Improving your credit, even slightly, can change your lender options dramatically.
Explore other lender tiers (B-lenders, credit unions, MICs):
Just because one lender said no doesn’t mean all will. A declined application at an A-lender could still be approved at a B-lender or credit union with different guidelines. You may pay a slightly higher rate, but it keeps your purchase or refinance on track.
Reassess your application and documentation strategy:
Missing income documents, expired IDs, or improperly structured down payments can all trigger declines. Tighten up your application package before trying again. A good broker will help you present your file in the best possible light.
Consider a co-signer or larger down payment:
If your income or credit falls short, a co-signer can strengthen the file. Alternatively, increasing your down payment can reduce lender risk and improve your ratios. Both options increase approval odds, if structured correctly.

Conclusion

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Advanced Mortgage Planning

How Construction Mortgages Work in Canada

Introduction

Conclusion

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Private Mortgages in Canada: Risks and Rewards

Introduction

Conclusion

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Understanding A-Lenders, B-Lenders, and MICs in Canada

Introduction

Conclusion

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Alternative Mortgage Lending in Canada: Your Options

Introduction

Conclusion

Still have Questions? Book a free call with Malcolm the Mortgage Guy

What to Do If Your Mortgage Application Is Declined

Introduction

Conclusion

Still have Questions? Book a free call with Malcolm the Mortgage Guy

Open vs. Closed Morrtgages

Introduction

Conclusion

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High-ratio vs. Conventional Mortgages

Introduction

Conclusion

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What is a mortgage broker?

Introduction

Conclusion

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How are mortgage penalties calculated?

Introduction

Conclusion

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What does it mean to port a mortgage?

Introduction

Conclusion

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