Progress Draw

A progress draw is a staged release of construction mortgage funds, paid out to the builder or borrower only after each completed stage of a build has been finished, verified, and accepted by the lender. Rather than advancing the whole loan at once, the lender releases money in instalments, often called draws, as the home moves from foundation to final completion.

How Progress Draws Work in Canada

Progress draws are used with a construction mortgage, sometimes called a draw mortgage, which finances building from the ground up instead of buying a finished home. The lender approves a total amount, then schedules advances against construction milestones. A common sequence runs from lot preparation and foundation, to framing, to lock-up when the roof, windows and exterior doors are in, then rough-in of plumbing, electrical and HVAC, then insulation and drywall, and finally finishing and occupancy.

Before each advance, the lender sends an appraiser or inspector to confirm the work is complete and on budget, an inspection that may carry a fee of its own. Lenders often also ask for receipts, invoices and, when a builder is involved, proof that subcontractors have been paid. The final portion is frequently retained as a holdback until the home is finished and, in some provinces, until the lien period has run.

Why It Matters to a Borrower

Draws protect the lender's security: money is released only against value that already exists. For a borrower, the practical effect is cash flow. If a stage slips, the next draw slips with it, and the builder may need other funds to keep crews working. Interest treatment also differs by lender. Some charge interest only on funds actually advanced, which keeps early costs lower, while others charge on the full approved amount from the first draw, raising the cost of a slow build. The method is set out in the commitment documents, so confirm it before signing.

Progress Draw vs. a Single Advance

When you buy an existing home, the lender advances the mortgage once, at closing. A progress draw spreads that funding across the build instead. At completion, the construction loan is usually repaid or replaced by a take-out mortgage, which is the longer-term loan carried afterward. Because a construction facility is short-term and carries more risk for the lender, its terms and pricing can differ from a standard mortgage, and default insurance rules may apply differently.

Frequently asked questions

How often are progress draws released?

Draws are tied to construction stages rather than to a calendar. Lenders commonly release funds after the foundation, framing, lock-up, rough-in and finishing stages, and each release follows an inspection. The exact stage list, documentation and timing are set by the lender in the construction mortgage commitment, so confirm the schedule before the build starts.

Does interest accrue on the whole construction loan or only on money drawn?

It depends on the lender. Some charge interest only on the amount actually advanced, which keeps costs lower in the early stages, while others charge interest on the full approved amount from the first draw. That difference can meaningfully change the total cost over a long build, so review the disclosure and commitment documents.

What happens if a stage fails inspection?

The lender typically withholds that draw until the deficiency is corrected and re-inspected. This can slow the schedule and shift costs, because the builder may have to carry materials and labour without the next advance. Keeping permits, invoices and inspection reports on file helps reduce delays.