A draw mortgage — also called a progress-advance or construction-draw mortgage — releases the loan in a series of advances tied to the physical progress of the build, each one verified by an inspection before the next is approved. Interest is charged only on the amount actually advanced at any point, not on the full committed loan, which matters because carrying costs on an undrawn balance would otherwise punish a borrower for money they have not yet touched.
This structure fits a custom or owner-built home, where the borrower is the one bearing construction risk: hiring the trades, managing the schedule, and living with the consequences if something runs long or over budget. The lender's job is to make sure the money keeps pace with the work, which is why every draw in this model is inspection-gated.
A completion mortgage looks and behaves like a standard mortgage — a single advance, on closing, against a finished, appraised property — except that the purchase agreement was signed before the home existed. This is the normal structure for buying a new-build home or condo unit from a production builder under a standard Agreement of Purchase and Sale.
Here the builder, not the buyer, carries the construction risk and the financing risk during the build. The buyer's mortgage commitment is arranged in advance but does not fund until the builder delivers a completed, occupancy-ready home, at which point the deal closes essentially like any resale purchase. There is no draw schedule for the buyer to manage because the buyer is not the one building.
New agents sometimes frame draw-versus-completion as a product decision a client makes. In practice it is decided by the structure of the deal itself. Buying a pre-sale unit or a production-built house from a builder is a completion mortgage by definition — there is no draw schedule to negotiate because the client never touches construction funds directly. Building a custom home on a lot the client owns or is purchasing is a draw mortgage by definition, because someone has to fund the trades as the work happens, and that someone is the lender, in stages.
Where it does matter for the broker is timing. A completion mortgage commitment can sit for many months while a builder finishes a project, and rate holds, appraisal timing and financing conditions all need to be managed across that gap — a very different conversation from a draw file, where the borrower needs money released continuously through an active build.
A client has signed an Agreement of Purchase and Sale for a pre-construction condo unit from a production builder. What financing structure applies to their mortgage?
The buyer is not building anything — the builder is. Because the builder carries the construction risk and funds the build itself, the buyer's mortgage behaves like any other purchase mortgage: a single advance on closing against a completed property. The tempting wrong answer confuses who is doing the building with who eventually pays for it; the fact that the unit does not exist yet at signing does not make it a draw file, because the buyer never manages construction funds directly.
