Skip to main content
Whether you're building or repairing, construction projects have many moving parts so it's important to focus on the details, especially when seeking a construction mortgage. Following these suggestions can help you achieve your project goals.

A construction mortgage is money you borrow to build a home instead of buying one ready for immediate occupancy. You can also use a construction mortgage to renovate or work on a fixer-upper you fell in love with.

Construction mortgages differ from the kind you apply for when you’re buying outright in terms of rates and repayment time. They usually last for the duration of the project (maximum one year), and sums are released at pre-determined phases.

Here are some important considerations before you undertake a construction or renovation project.

1. Gather your key documents in order to pre-qualify for a construction mortgage

This may be your most important step. Based on the information you give to a financial institution, they can determine how much credit can be extended to you.

Documents needed to apply for a construction mortgage:
  • Two forms of valid Photo ID (passport, national identity card, driver’s license are all acceptable)
  • Proof of permanent address (for example, a recent utility bill)
  • Proof of employment and a recent payslip. If you’re self-employed, financial statements for the past three years along with cash-flow projections for the next 12 months.
  • Supporting evidence of your existing mortgage (property deed, land tax / building tax receipt)
  • Approved building plans
  • Copy of builder / contractor’s estimates
  • Two reference letters for the builder / contractor
  • A quantity surveyors report

In addition to the above checklist, there are other requirements that you should gather before your appointment. The documents you need may vary depending on your country of residence (or the country you’re building in, if that’s different from where you live.) For a complete checklist for your country, click on the relevant link:


Don’t rush into your building plans

Before you get your heart set on a particular vision for your home, ensure you know what you qualify for first. Only when you truly know what you can afford should you call the architects and draftsmen to formally draw up your plans. Getting planning and building approval in your desired location should also be undertaken after pre-qualification.

You will want to think about the sort of home renovation or construction that will help to raise the value of your home. Painting and landscaping are great for aesthetic enhancement, while kitchen and bathroom remodelling can give more space as well as the opportunity to do a bit of modernising. Adding a deck or a patio can add both space and beauty to the building.

Prepare for the unexpected

You should have at least 10% of your construction estimate saved and ready to use in case of unforeseen and unavoidable costs. Even the best-planned construction project is likely to run into delays, extra expenses, and unexpected problems. Setting a special fund aside for these issues means less worry when such events arise.

Research before selecting a contractor

When it comes to choosing who’s going to work on one of the most significant investments of your life (both financially and emotionally), you don’t want to leave much to chance. Do your research and get multiple quotes. Ask to see previous work. Even better, get references and talk to people whom they’ve worked with in the past. Are they good at sticking to timelines and budgets? Do you feel comfortable discussing issues with them? Remember, you may be working with them for a while.

Stay connected with the project

A good contractor — or the foreman on the project — will be invaluable to the job and your peace of mind. Even with a strong construction team in place, be sure to check the progress personally. Are you satisfied with the pace at which things are progressing? Do you see things that might need a bit of tweaking? Staying connected with the building project ensures that you can catch errors or things that need adjustment before it’s too late.

Whether building from the ground up or renovating an existing home, the effort and energy you invest in construction is no small thing. Along with good planning and sound advice, a construction mortgage can provide the equity you need to keep your project financed and running smoothly.

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.