How Do Construction Loan Draws Work with a Private Lender in Ontario?

Stonefield Capital releases private construction loan funds in milestone-based draws, with an initial advance at closing and further advances as each agreed build phase is complete and installed on site. The loan is sized to what the property is worth today, and that number rises as the build does. Interest accrues only on the amount drawn at any given time, not on the full commitment. This post is the practical draw and submission walkthrough. If you need the foundational overview first, start with What Is a Construction Loan from a Private Lender in Ontario?

What Is a Construction Draw?

A construction draw is a scheduled release of committed funds tied to a verified stage of completion. Each draw is not automatic: the borrower requests it, an inspector confirms the phase is complete and the materials are in the building, and then funds advance. The total of all draws equals the construction commitment; no funds beyond that commitment are available without a new underwrite.

How Is the Initial Advance Structured?

An initial advance is released at closing. The size of that advance is set at commitment and reflects the opening stage of the project — typically mobilization, site prep, or the start of foundation work. The borrower begins paying interest on that amount immediately. No interest accrues on undrawn funds.

When land acquisition and construction are combined into a single facility, the land portion is typically reflected in the initial advance. That structure is available when the land value supports the opening advance and the as-completed value and construction budget support the full commitment.

What Milestones Trigger Subsequent Draws?

There is no fixed schedule. The milestones are agreed at commitment and sized to the project: a small build may have two or three draws after the initial advance, a ground-up house more. What does not change is the test each one has to pass.

A phase counts when it is complete and installed. Materials bought are not a milestone; materials in place are. Concrete ordered is nothing; the foundation poured and cured is a draw. Hardwood on pallets is nothing; hardwood laid is a draw. Windows delivered is nothing; windows installed is a draw. That is how Stonefield Capital confirms the money went into this building on this site, and it is why a draw request goes in after the phase is finished, not partway through it.

Work done after the request but before the inspector has seen the site does not accelerate the draw; it goes into the next one.

How Does One Draw Actually Move — Step by Step?

Work done. The borrower or contractor confirms the milestone is complete.
Inspection request submitted. The broker or borrower notifies Stonefield Capital that the stage is ready for review.
Independent inspector attends site. An inspector (not the borrower's contractor) visits, confirms the phase is complete and the materials are installed rather than stockpiled, and reports. Reporting typically takes days, not weeks.
Funds advanced. Once the inspector's report confirms completion, the draw is released. When the report is clean, funds move within days of receipt.

There is no cost-to-complete report required at every stage and no engineering sign-off on routine construction items. The inspection is practical, not bureaucratic.

What Does Underwriting Look At?

Every private construction mortgage is sized to what the property is worth today, and that number moves as the build does.

Until there is a foundation, framing and a roof, the project is land. Too much can go wrong before the structure is weather-tight, so the opening advance is sized against the land value, whether the site is owned or being acquired.
After that, the project is valued as-is. Each completed phase raises the current value, and the amount available to draw rises with it.
As-completed value is reviewed, not lent against. Comparables for the finished property shape the commitment and the exit, but the money advanced never gets ahead of the current value of the house.
Construction budget: line-itemized, with a 10–15% contingency built in
Exit plan: a named takeout lender category (conventional refinance, insured mortgage, sale) with realistic timing

A Notice of Assessment is always requested. CRA arrears rank ahead of a mortgage on title, so confirming their absence protects the equity position that the file is built on. Income is not tested; the NOA serves a title-protection function, not an income-verification function.

Why Does a Budget Without Contingency Stall a File?

A tight budget with no contingency is the most common reason a construction file stalls or requires renegotiation mid-build. Construction costs shift — materials, labour, and permit timing all carry variance. A 10–15% contingency line in the budget signals that the borrower and builder have planned realistically. A budget with zero slack signals the opposite, and Stonefield Capital will flag it before commitment rather than after the first cost overrun.

What Happens If the Build Runs Long?

Construction terms run from 1 to 12 months, with the exit plan setting the expected duration at the outset. If a project falls behind schedule, three options exist: a term extension, an adjusted draw schedule, or a revised exit plan. None of those options requires starting over — but they all require early notice. A borrower who flags a delay proactively has real options. A borrower who flags it at the final draw with the term nearly expired has far fewer.

Extra funds beyond the original commitment — whether from scope changes or cost overruns beyond the contingency — require a new underwrite, not just a draw request.

What Does the Broker Submit to Open the File?

Send the following package to open a construction file with Stonefield Capital. Missing items slow the initial response; a complete submission gets a faster answer.

Property address: civic address and legal description if available
Land value or purchase price: current value or agreed purchase price for the site
Line-item construction budget: itemized by trade, with a 10–15% contingency line shown separately
As-completed value support: comparables, a prior appraisal, or a broker's market analysis supporting the finished value
Permits status: whether building permits have been issued, applied for, or are pending
Builder or contractor details: name, licence status, and brief track record
Exit plan: the category of takeout (e.g., conventional refinance to an A or B lender, insured mortgage, sale) and realistic timing
Notice of Assessment: most recent, for all borrowers on title, to confirm no CRA arrears

As noted in Can You Get a Private Mortgage in Ontario Without an Appraisal?, Stonefield Capital typically runs its own comparable-sales analysis rather than requiring a formal appraisal upfront — which saves the borrower a fee and several days. When an appraisal is warranted on a construction file, that is flagged in the initial response, not at commitment.

What Rates Apply and Where Can Brokers Find Them?

Construction mortgage pricing is based on loan-to-value, draw position, and project profile. Current indicative rates are published at stonefieldcapital.ca/private-mortgage-rates. Legal fees are typically approximately $3,000 per transaction. All pricing is subject to underwriting and confirmed at commitment.

Frequently Asked Questions

Does interest accrue on the full construction commitment from day one?

No. Stonefield Capital charges interest only on amounts actually drawn. If the initial advance at closing is a fraction of the total commitment, the borrower pays interest on that fraction only. As each subsequent draw is advanced, interest applies to the new cumulative drawn balance. Undrawn funds carry no interest cost.

How long does it take to receive a draw once the inspection is done?

Once an independent inspector confirms milestone completion, Stonefield Capital typically advances the draw within days of receiving the report. The inspector's site visit and reporting generally take days, not weeks. The process is designed to move with the build, not behind it. The broker should submit the draw request as soon as the milestone is reached.

Can land purchase and construction be rolled into one facility?

Yes, in many cases. When the land value supports the initial advance and the as-completed value and construction budget support the full commitment, Stonefield Capital can combine land acquisition with construction financing into a single facility. The land cost is typically reflected in the initial advance at closing. The broker should include the purchase price and as-completed comparables in the opening submission.

What happens if costs exceed the budget and the contingency is used up?

Any funds needed beyond the original commitment — whether from scope changes or overruns that exceed the contingency — require a new underwrite. The existing draw schedule does not automatically expand. Brokers should advise borrowers to carry a genuine 10–15% contingency from the start and to notify Stonefield Capital early if costs are tracking over budget, before the contingency is exhausted.

Why is a Notice of Assessment required if Stonefield Capital doesn't test income?

The Notice of Assessment is requested to confirm the absence of CRA arrears, not to verify income. CRA tax debt is a Crown priority and ranks ahead of any registered mortgage on title. Unresolved CRA arrears reduce the effective equity that the construction file is underwritten on. Confirming a clean CRA position protects the borrower's equity and the integrity of the file, regardless of income level.