Definition
Interim (construction) financing is a short-term loan granted to a builder or plan buyer to finance construction costs of a residential building.
**Progressive draw mechanism**: Unlike a standard mortgage, funds are released progressively based on construction progress: 1. **Start** (foundations): 15-20% of budget 2. **Closed to weather** (structure, roof): 25-30% 3. **Airtight** (windows, doors, insulation): 20-25% 4. **Finishing** (plumbing, electrical, finishes): 25-30% 5. **Occupancy** (final certificate): balance
**Cost**: - Rate generally variable (prime + 1 to 2%) - Interest calculated only on disbursed funds - Inspection fee at each disbursement ($100-$300)
**Transition to permanent mortgage**: At delivery, the buyer obtains their permanent (standard) mortgage, which repays the interim financing. This transition is managed by the notary at the closing date.
**GCR (Garantie de construction résidentielle) warranty**: All new residential construction in Quebec must be covered by an accredited warranty plan (e.g., GCR), a prerequisite for CMHC insurance on a new property.