How Do Private Construction Loans Work?
If you’re building your dream home, managing a new construction project, or trying to secure financing as a self-employed borrower, you’ve likely run into one major obstacle: trying to finance a construction loan. Between the paperwork, the delays, and the rigid requirements, it’s enough to stall even the most motivated builder.
That’s where private construction loans come in — and why more borrowers (and brokers) are turning to this alternative option.
Why Traditional Construction Loans Fall Short
Construction financing through banks or credit unions isn’t built for speed or flexibility. It often involves a mountain of paperwork, lengthy approval times, and frustrating delays with draw releases. That’s a problem — especially for self-employed borrowers or owner-builders who may not fit the traditional lending mold.
Let’s break it down:
Banks typically require:
Full cost breakdowns and budgets
Income verification (T1s, NOAs, etc.)
Updated appraisals at each stage
Proof of liquidity before every draw
Draws can take weeks to process, which means if you're waiting on money to keep building, you're losing valuable time — and potentially racking up additional costs.
One thing no one talks about? Banks don’t actually want to do construction loans. They can be a heavy admin burden that require constant oversight. A standard mortgage gets filed away after closing, whereas a construction loan requires monitoring throughout.
Private lenders, on the other hand, take a different approach.
The Private Lending Advantage
Private construction loans offer a streamlined alternative that focuses on getting you funded — not buried in red tape.
Here’s what sets them apart:
Simplified Process
No income verification hoops. No massive liquidity proof. Just common-sense underwriting and a straightforward path to funding.Fast Draws
Private lenders often fund draws within a day or two — sometimes even the same day. Need a site visit? That can happen fast, too. This keeps trades paid, materials delivered, and your build moving forward.Ideal for Self-Employed Borrowers
At Keystone, we know your business income doesn’t always look like a 9-to-5 paycheck. We work with what makes sense, not just what fits the bank’s box.No Long-Term Lock-In
Unlike some credit unions that lock you into a 5-year mortgage after the build, private lenders allow you to refinance once the project is complete — often into a better, long-term solution.
Tip: The shorter your construction timeline, the lower your total financing cost. Having trades lined up and a clear plan in place can make a huge difference.
The Financial Upside
Yes, private loans may carry higher interest rates and setup fees than traditional options — but that’s only part of the story.
If you can complete your build in 6 to 8 months, you’ll often:
Refinance into a lower-rate mortgage with an “A” lender once construction wraps up
Avoid being stuck in a higher fixed-rate term from a credit union
Save money over the 5-year period, even after accounting for the higher short-term cost
Most importantly? You reduce the stress, delays, and carrying costs that can derail your project.
Keystone’s Construction Loan Program
We offer private construction loans across Atlantic Canada, with a focus on urban areas. Our program is built specifically for:
Self-employed borrowers
Owner-occupied builds
Spec homes
Real estate investors doing new construction or major renovations
Key features:
Fund up to 65% of completed value (sometimes as much as 100% of costs)
Flexible, clearly defined draw schedules
Less paperwork, faster decisions
Responsive, personal communication throughout the build
Our goal? To give you a stress-free construction financing experience — so you can focus on building, not chasing paperwork.
Final Thoughts
Private construction loans aren’t for everyone — but for the right borrower, they’re a game-changer.
✅ Simpler process
✅ Faster funding
✅ More flexibility
✅ Shorter commitment
If you’re a mortgage broker working with a client who’s building, or a borrower who’s been turned away by the bank, we’d love to connect. Keystone also has a free calculator available to do a cost comparison for private vs. traditional lender on a new build. Reach out and we can send it to you!
Let’s help you complete your build — on time and on budget.
