A draw schedule sets out, in advance, the milestones that will trigger each advance of construction funds and roughly what percentage of the loan each milestone releases. It is agreed before the first shovel goes in the ground and forms part of the construction mortgage commitment — the borrower knows going in what has to be finished before the next cheque is released, and the lender knows what it is being asked to fund at each step.
A commonly seen pattern uses four to five draws tied to major construction milestones — for example, foundation complete, the structure framed and enclosed ("lock-up"), rough mechanical and drywall complete, and final completion — with the percentage released growing at each stage. This pattern is illustrative only. Actual draw counts and percentages differ from lender to lender and are shaped by the size of the project, whether the loan is insured, and who owns the lot going in; never present a specific split to a client as a fixed, universal rule.
Before any draw is released, an inspection confirms that the claimed stage of construction has actually been reached. Critically, this inspection is arranged and paid for on the lender's behalf by an independent appraiser or inspector — not the borrower's general contractor, and not the municipal building inspector who signs off on code compliance. The lender's inspector is assessing value and progress for lending purposes specifically; a municipal permit inspection and a lender's progress inspection are two separate things that happen to overlap in timing.
The borrower is typically responsible for the cost of these inspections, either paid directly or deducted from the draw itself, and should budget for this as a real, recurring line item across the build rather than an afterthought.
Inspections do not always confirm a clean pass. If a stage is partially complete, or complete but with visible deficiencies, the lender's inspector will typically hold back a portion of that draw, or delay it, until the outstanding work is finished and re-inspected. This protects against a scenario where funds are released for work that was represented as done but was not.
For the borrower and their trades, this makes the draw schedule a real cash-flow constraint, not a formality. A contractor expecting payment on a projected date can be left waiting if the inspection does not confirm the milestone, which is one of the more common sources of friction on owner-managed self-builds — a topic covered in more depth in module 06.
Separate from the draw percentages themselves, provincial construction-lien or builders-lien legislation requires a holdback on payments made to contractors and subcontractors, to protect the people doing the work if they are not paid. This holdback is not the same mechanism as the lender's draw structure, but it interacts with it directly, since the borrower's own payments to their contractor flow through the same construction budget the lender is monitoring. Module 05 covers the provincial holdback regimes in detail, because they differ meaningfully by province and are frequently the least understood part of a construction file.
Who inspects the property to confirm a construction milestone has been reached before a lender releases the next draw?
The lender needs an independent check because the party asking for the money — the borrower or their contractor — has an obvious interest in the draw being approved. A municipal inspector checks code compliance, which is a related but different question from whether the lending milestone has actually been met. The lender's own inspector or appraiser is the one confirming progress for the purpose of releasing funds, and self-reported photos are not a substitute for that independent verification.
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