A construction loan will allow a prospective homeowner to borrow money to select and buy a piece of land, and construct his own home from the ground up.
A construction loan Canada is different from regular mortgages on homes both on the term of the loan and the way you will receive the money that has been sanctioned.These loans are meant to be a short term means of financing construction and is disbursed in parts depending on the stage of construction that has been reached.
These loans carry higher interest, as lenders do not consider it a complete equity that can be easily disposed of it the loan has to be recalled for non-payment. These loans, also called draw mortgages, are paid in installments with each installment depending on the stage the construction that has been reached. This way the lender ensures that loan is used for construction and will often make payments directly to the contractor building the home.