Private construction loan Ontario: how GTA builds actually get funded
When institutional construction draws stall or the bank declines a non-conforming file, private construction financing can keep a GTA build moving. This guide explains real pricing, draw mechanics, Ontario holdback law, and how to structure an exit to A or B take-out financing.
The framing crew shows up Monday. Drywall is booked for late September. Your bank approved in principle, but the foundation draw is now weeks late in an underwriter queue while trades wait. Or the bank declined the file outright because you are self-employed, the build is non-conforming, or your GC is outside their approved panel.
That is usually when borrowers start searching for a private construction lender in Ontario. It is also when the wrong lender can blow your schedule, or save it.
Richview Capital is an Ontario-licensed Mortgage Investment Corporation (MIC) lending across the GTA. We fund construction 1sts, construction 2nds, land 1sts, and short-term bridge facilities. Once the Quantity Surveyor signs off, advances move in business days, not weeks.
Takeaways
- Private construction lenders fund files A-lenders will not, and can advance draws in business days once QS clears.
- Richview published construction pricing: 1st from 9.99%, 2nd from 11.99%, land 1st from 7.99%, with typical lender fees of 2%.
- Bridge financing starts from 8.99%, lender fee 1-2%, for 1-90 day gaps.
- Approval is equity- and project-driven; income is reviewed, but project execution and exit are primary gates.
- Ontario law imposes a 10% statutory lien holdback on progress payments under the Construction Act.
- Most private construction loans are 12-18 month bridges; plan take-out from day one.
- Verify your broker licence with FSRA before signing.
What Is a Private Construction Loan?
A private construction loan is a short-term, draw-funded facility secured by the property. Funds are advanced by milestone after independent verification, then repaid through sale or take-out refinance. Compared with bank construction lending, private underwrites are generally more flexible on borrower profile and timeline, but carry higher rate and fee costs.
Construction loan vs construction mortgage vs take-out
- Construction loan: short-term interest-only facility funded in draws over 6-18 months.
- Construction mortgage: same mechanics, registered as a mortgage charge on title.
- Take-out financing: long-term mortgage that pays out the construction loan after occupancy/completion.
Order of operations: secure construction financing, build through draws, complete occupancy, then refinance into take-out.
When borrowers move to private construction lending
- Bank decline due to borrower profile or project type.
- Institutional draw delays that threaten schedule and trade commitments.
- Spec-build overlap between projects.
- Lot acquired before permits clear (land hold strategy).
- 30-90 day completion-to-take-out or closing bridge gap.
The Ontario construction lender landscape
Ontario construction financing typically spans three tiers: government/institutional programs (lowest cost, narrow criteria, long timelines), major banks (competitive cost, strict B-20 stress test from OSFI and builder covenants), and specialized/private lenders including MICs (highest cost, fastest operational flexibility). Richview operates in the private/MIC tier.
MIC vs Individual Private Lender on a Construction File
On construction, where six to ten draws can occur over a year or more, operational consistency matters. A MIC pools investor capital under Section 130.1 of the Income Tax Act and lends institutionally. Read more about how a Mortgage Investment Corporation works and the investor side of a MIC.
| Construction file factor | MIC lender | Individual lender |
|---|---|---|
| Draw operations | Standardized process and timelines | Can vary file-to-file |
| Capital stability | Pooled capital | Dependent on individual liquidity |
| Renewal behavior | Policy-driven | Can be discretionary |
| Documentation | Consistent broker/lawyer workflow | Can be ad-hoc |
Ontario brokered mortgage activity is regulated by the Financial Services Regulatory Authority of Ontario (FSRA) under the Mortgage Brokerages, Lenders and Administrators Act, 2006. Use a licensed broker and verify your advisor through the FSRA registrant search before signing.
How GTA Projects Are Qualified
Private construction lending is primarily equity- and project-driven. Loan size is governed by as-complete value and budget feasibility, not just personal income tests.
LTC vs LTV and practical cap
Construction files are often modeled with Loan-to-Cost (LTC) and as-complete value limits. Richview construction programs typically cap at up to 65% of end value on qualifying files.
What underwriting looks at
- Permit status and readiness to break ground
- GC track record and project management quality
- Budget quality (Class B/C style scope and contingencies)
- Site/title conditions and marketability
- Credible take-out or sale exit at maturity
Owner-builder positioning
Experienced owner-builders can be considered with tighter conditions; first-time owner-builders on complex custom projects are often high-risk and may be declined.
Files generally declined
- No permits in hand (or not near-final)
- Rural/out-of-zone locations outside core GTA commuter belt
- Highly speculative/non-marketable build types
- Leverage above policy caps
- No workable exit strategy
Real Numbers: Construction Pricing in Ontario
Published rates and fees
| Product | Rate (from) | Lender fee | Cap | Term |
|---|---|---|---|---|
| Construction 1st mortgage | 9.99% | 2% | Up to 65% of end value | 6-18 months |
| Construction 2nd mortgage | 11.99% | 2% | Up to 65% combined | 6-18 months |
| Land 1st mortgage | 7.99% | 2% | 65% LTV | 6-12 months |
| Bridge financing | 8.99% | 1-2% | Subject to file | 1-90 days |
Rates are starting points; actual pricing depends on project profile, leverage, term, and underwriting quality. Subject to change. For published rate floors as shown on this site, see the borrowers program page.
Typical third-party costs
| Cost line | Typical range | Notes |
|---|---|---|
| Broker fee | 1-2% | Set by broker, not lender |
| Legal fees | $2,500-$5,000 | Construction commitments are more conditional |
| As-complete appraisal | $700-$1,500 | Sets end value baseline |
| Quantity Surveyor | $2,500-$8,000+ | Initial review + per-draw reports |
| Title insurance | $400-$700 | Construction title policy |
Worked example: $1.2M custom build, 65% LTC
| Item | Lower-end | Higher-end |
|---|---|---|
| Loan amount (65% x $1.2M) | $780,000 | $780,000 |
| Indicative rate | 9.99% | 11.99% |
| Lender fee (2%) | $15,600 | $15,600 |
| Broker fee (1.5% assumed) | $11,700 | $11,700 |
| Legal | $4,000 | $4,000 |
| As-complete appraisal | $1,000 | $1,000 |
| QS (initial + 5 draws) | $5,500 | $5,500 |
| Title insurance | $500 | $500 |
| Estimated Year 1 interest carry* | ~$38,961 | ~$46,761 |
| Total estimated Year 1 cost | ~$77,261 | ~$85,061 |
*Assumes average deployed balance near 50% of commitment over a 12-month draw schedule.
A vs B vs private on the same build
| A lender | B lender | C / MIC (Richview) | |
|---|---|---|---|
| Indicative rate | ~6% range | ~8% range | 1st from 9.99%, 2nd from 11.99% |
| Typical lender fee | $0 / small admin | ~1% | 2% |
| Qualification | B-20, full docs, strong covenant | More flexible, GC reviewed | Equity and project driven |
| Decision speed | 3-8 weeks | 2-4 weeks | 24-72 hours (complete file) |
| Draw turnaround post-QS | Often 2-4 weeks | 1-2 weeks | Business days |
How Draws Actually Work
Typical GTA draw schedule
| Stage | Approx % of loan | Verification milestone |
|---|---|---|
| Foundation | 20-25% | Footings/foundation complete and backfilled |
| Structure / lock-up | 25-30% | Framing complete, roof/windows/doors installed |
| Drywall / mechanical | 25-30% | Rough-ins passed, drywall hung/taped |
| Completion | 15-20% (less holdback) | Finishing complete, occupancy readiness |
Quantity Surveyor role
The QS is an independent verifier used by the lender. The lender orders QS reports, the borrower pays the cost, and advances are made against verified completion. On most files, site visit plus report is completed within a few business days of milestone claim.
Ontario 10% holdback
Under Ontario's Construction Act (Ontario), a 10% statutory lien holdback applies to progress payments. Practically, each draw is reduced by holdback, the holdback pool accumulates through the project, and release occurs after the lien period closes. Your lawyer coordinates holdback flow and release mechanics.
Richview timing after QS sign-off
On clean files, once QS clears and legal conditions are satisfied, advances are sent in business days. Lawyer responsiveness and unresolved prior-draw conditions are the usual timing variables.
Choosing the Right Product
- Construction 1st: full stack replacement in first position; typical for new builds/teardowns.
- Construction 2nd: keep cheap existing 1st, add construction debt behind it (with postponement).
- Land 1st: hold lot pre-permit/start; often rolls into construction 1st.
- Bridge: 1-90 day gap coverage for closing or take-out delays.
What Can Derail Draws
- Cost overruns/change orders: raise early; top-up may be possible if file still pencils.
- Permit/inspection delays: affected draws pause until corrected.
- GC replacement: lender must approve replacement before further advances.
- Registered lien: draws usually pause until lien resolution.
The Honest Risks
Default on a partially built property is typically enforced by power of sale under Ontario law. Incomplete homes are harder to sell, so maturity planning matters. The bigger practical risk is take-out failure at maturity: late build, low appraisal, or borrower profile drift forcing expensive renewal. Solve this by underwriting your exit at origination.
Red flags when shopping lenders
- No FSRA licence disclosure
- Unwritten or vague draw conditions
- Undisclosed fees or renewal terms
- Pressure to sign before legal review
- Cash/e-transfer requests outside lawyer trust accounts
Your Take-Out Strategy
Best practice timeline: month 1 confirm target A/B lender criteria, month 6 clean up credit/documentation, month 9 start take-out application and appraisal coordination, month 12 align submission with occupancy timing. A private construction loan with a credible exit is a tool; without one, it becomes expensive drift.
How to Choose a Private Construction Lender in the GTA
Ask direct operational questions: rate lock, fees in writing, interest-only mechanics, average draw turnaround post-QS, who orders/pays QS, holdback handling, overrun protocol, renewal pricing, and sample commitment language.
Frequently Asked Questions
How fast is a typical draw after QS sign-off?
On a clean GTA file, funds can move to lawyer trust in business days after QS clearance and legal conditions are met.
How fast can first advance be funded?
Often 2-4 weeks on a complete file once appraisal, initial QS review, legal setup, and registration are complete.
What leverage is possible?
Typical cap is up to 65% of end value on qualifying construction files; non-standard files can cap lower.
Is QS required and who pays?
Effectively yes for private construction files. Lender orders; borrower pays from proceeds.
Do owner-builders qualify?
Some do, especially with proven experience and straightforward scope. First-time complex owner-builds are often not a fit.
Are payments interest-only?
Typically yes, on deployed balance only, with monthly servicing.
Construction loan vs construction mortgage?
Same economic instrument. "Mortgage" describes title security form; "loan" describes funding mechanics.
Talk to Richview Capital About Your Build
If you are evaluating a GTA build and need practical timing on draws, holdback flow, and take-out planning, we can review whether the file fits and what the costs look like in real dollars. Talk to Richview Capital to pressure-test your timeline.
Need construction draws that match your schedule?
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This article is general information only—not financial, legal, construction, or tax advice. Rates, fees, leverage limits, draw timing, and approvals vary by project and underwriting. Products are subject to change and are not an offer of credit.
