RBC Construction Mortgages

Building Your Own Home

An RBC Construction Mortgage can help you finance the costs of building your dream home.

Mortgages Designed for Constructing Your Own Home

What is a Construction Mortgage?

A construction mortgage is exactly what it sounds like – a mortgage that helps finance the costs of constructing your own home.

Common scenarios for construction mortgages could include:

Building a new home on a vacant lot (including tearing down an existing home to build a new one)
Purchasing a new home and completing a major renovation that includes structural changes, such as removing a load bearing wall or adding an additional floor
Refinancing an existing mortgage to complete a major renovation or multiple cosmetic changes that require the projected completion value to support financing.

How Construction Mortgage Financing Works

It’s important to note that there is difference between how construction mortgages and traditional mortgages are funded. With a traditional mortgage, funds are advanced in full at the time of home purchase (i.e., when your purchase transaction closes).

With a construction mortgage, funds are provided through multiple advances - or "progress draws" - at different stages throughout the construction process. In this way, your RBC Mortgage Specialist can help you manage the financing of your new home build from the beginning through to completion.

Example of a Progress Draw Schedule for a Construction Mortgage

Start

Construction financing approved for $320,000. Rate commitment begins.

Draw

$65,000

First draw is 65% of the appraised value of the lot purchased (maximum amount the bank can release). First draw must occur within the rate commitment period.

Draw

$15,000^*

Second draw is provided once the foundation and backfill have been completed/inspected. The foundation must be completed within 180 days of Draw 1.

Draw

$90,000^*

Third draw is on completion/inspection of the framing, roof, doors and windows.

Draw

$105,000^*

Fourth draw is on completion/inspection of the electrical, plumbing, insulation, exterior brick/siding.

Month 12 Final Draw

Fifth and final draw is when the home is 100% complete.

First mortgage payment (principal and interest) is due one month after the completion of the home.

Total Mortgage: $320,000

Assumptions: $100,000 lot value, $300,000 construction cost, 20% down payment ($80,000).

Interest-only payments on the outstanding mortgage balance are required monthly during the construction phase.

^* A portion of each draw amount is held back for a period of time according to provincial requirements for construction-lien holdbacks. Speak to an RBC Mortgages Specialist for further details.

Additional progress draws subject to proof of completion of required milestone.

Redeveloping your existing home into multiple units?

If you are looking to redevelop your existing single-home property into multiple living units, the RBC Multi-Unit Construction Mortgage Program is available. This could include a secondary structure that sits on your property (e.g. an Accessory Dwelling Unit (ADU) such as a garden suite or laneway home) or converting a home to a duplex or triplex.

Learn more

Expert Advice End-to-End

While building your own house can be a creative and exciting experience, it can also present some complicated financial challenges. RBC Mortgage Specialists can give you the support you need to guide you through the financing process when building your home.