Two paths to CMHC-insured construction.
There are two ways to bring CMHC insurance into a ground-up multi-family project. Path A (construction-to-term) wraps construction and permanent financing into a single underwriting with an approved lender, with CMHC insurance in place from day one. Path B (completion takeout) uses a conventional construction loan during the build and refinances into a CMHC-insured permanent mortgage at stabilization.
Both paths are valid. The choice depends on lender relationship, project size, construction risk appetite, and the developer's timeline. Since June 2024, CMHC explicitly allows non-approved construction lenders to write loans underwritten to a CMHC takeout — making Path B more practical than it used to be.
Construction-to-term vs. completion takeout.
Path A is simpler and cheaper in transaction cost; Path B gives developers more flexibility in construction-lender selection.
One CMHC-approved lender handles both construction advances and the permanent mortgage in a single underwriting. Construction advances are CMHC-insured from day one. At stabilization, the loan converts to permanent without re-underwriting. CMHC commitment must be in place before breaking ground.
- + Single underwriting — no refinance risk at completion.
- + Rate locked at commitment — interest-rate risk shifted to the lender.
- + Capitalized interest during construction.
- – Locked to a single lender through the term.
Developer uses a conventional (non-CMHC) construction loan during the build — from a bank, credit union, or non-bank private lender — and then refinances into a CMHC-insured permanent mortgage at completion. Since June 2024, CMHC explicitly allows non-approved construction lenders to write loans underwritten to a CMHC takeout. The refinance application is classified as "new construction" and constrained to a maximum 95% of construction cost.
- + Flexibility in choosing the construction lender.
- + Use CMHC takeout as exit story to win construction financing.
- – Construction-phase rate risk sits with developer.
- – Refinance subject to CMHC approval at completion.
How funds release during construction.
Monthly advances tied to on-site inspections per the drawdown schedule. CMHC reviews the first and last draw requests directly; intermediate draws are administered by the approved lender with independent inspector verification.
| Phase | Stage | Reviewer | Notes |
|---|---|---|---|
| First draw | Initial (site + excavation) | CMHC direct review | Land position, initial soft costs, mobilization. |
| Intermediate draws | Monthly progress | Approved lender + independent inspector | Monthly inspections tied to drawdown schedule; lender administers with inspector verification. |
| Final draw | Completion / occupancy | CMHC direct review | Occupancy permits, final cost report, rental achievement verification. |
Required before funding. Confirms project budget, cash-flow schedule, sources and uses, fixed-price contracts, zoning compliance, and the detailed construction schedule. Updated periodically through the build.
Interest during construction can be capitalized into the loan amount — a material benefit under MLI Select's 95% LTC, since the capitalized portion doesn't require fresh equity.
Bonding is now generally required.
Previously, bonding requirements varied by project size and lender discretion. As of November 2024, CMHC now generally requires bonding on all construction loans — 50% labour & material plus 50% performance, typically via surety.
Alternatives are accepted at ≥10% of hard costs: letter of credit, collateral security, or a loan reduction. Projects of 24 units or fewer receive more flexibility in the bonding instrument.
Full policy timeline →- Standard requirement
- 50% labour & material + 50% performance bonding (surety)
- Alternatives
- Letter of credit, collateral security, or loan reduction at ≥10% of hard costs
- Small-project flexibility
- Projects of 24 units or fewer: more flexibility in bonding instrument
- Change date
- Updated November 2024 — now generally required on all construction loans