How a construction mortgage works
A normal mortgage hands you all the money at once to buy a finished home. A construction mortgage is different. The lender releases the money in stages, called draws, as the build reaches agreed points. You pay interest only on the money that has been advanced so far, not the whole loan.
When the homes are finished, the construction mortgage is paid off, either from selling the homes or by replacing it with regular long-term mortgages.
How much of your own money you need
Standard bank construction loans usually ask for 25% to 40% of total project cost as your own equity, so the loan covers the remaining 60% to 75%. The exact figure depends on your experience, how many homes are pre-sold, and how strong the location is.
Some BC credit unions now offer multiplex-specific construction mortgages that can cover up to roughly 80% of project cost with interest-only payments during the build. That means you need less of your own cash than a traditional bank loan, which is why credit unions have become popular for these projects.
What the draws pay for
Draws are tied to progress. A lender or its inspector confirms the work is done before releasing the next amount. This protects the lender and keeps the project on track.
Because you pay interest only on what has been drawn, your carrying cost is lower early in the build and rises as more money goes out. Budgeting for that rising interest is part of a realistic plan.