Multi-Residential Construction Financing in Quebec, Step by Step

Financing a new rental building is a different process from buying an existing one. There is no income yet, the value doesn't exist until the building does, and the lender's risk changes month by month. Most Quebec projects are financed in two stages: a construction loan to build, then a take-out loan that replaces it once the building is complete and leased.

Stage 1: the construction loan

A construction loan is advanced in draws as work progresses, not as one lump sum. Before each draw, a cost consultant or quantity surveyor hired by the lender inspects the site and confirms the work completed and the remaining cost to complete.

What lenders look at

• Budget and cost-to-complete: a detailed budget with hard costs, soft costs, contingency and financing costs.

• Equity: your equity is usually required up front, before the lender's first advance.

• Permits and plans: a building permit, or a clear path to one, and stamped plans.

• Builder: the general contractor's experience, financial strength and RBQ licence.

• Exit: a realistic take-out, supported by market rents and a pro forma.

Holdbacks

Lenders and owners retain part of each payment to contractors as a holdback, which is released once the work is accepted. Budget for it in your cash flow planning: holdbacks affect when subcontractors are paid and how much cash you need on hand near completion.

Stage 2: the take-out loan

Once the building is complete and rented, the construction loan is repaid by long-term financing. For rental projects, that is often a CMHC-insured loan, which offers longer amortizations and higher leverage than conventional term debt.

CMHC's MLI Select can allow up to 95% loan-to-cost on new construction and amortizations of up to 50 years, depending on the points your project earns for affordability, energy efficiency and accessibility. In 2025, CMHC also removed the rental achievement holdback on market-rate MLI construction loans, which can now be advanced up to 85% of cost or value without it.

Many developers secure a CMHC certificate of insurance before construction begins, so a single insured loan covers both the construction period and the long-term mortgage. When that isn't possible, the project is built with a conventional or private construction loan and refinanced into an insured loan later.

Federal construction lending

CMHC also lends directly through its Apartment Construction Loan Program (formerly the Rental Construction Financing Initiative), which offers low-cost loans with long amortizations to eligible rental projects that meet affordability, accessibility and energy targets. It is competitive and demanding, but for the right project it can be the best capital available.

Common mistakes that delay funding

• Applying for financing after the budget is final, instead of building the financing into the budget from the start.

• Too little contingency. Lenders will test it, and cost overruns must be funded with your equity.

• Market rents in the pro forma that the appraiser won't support.

• No plan for the gap between substantial completion and full lease-up.

WeFinanceU is an AMF-registered commercial mortgage brokerage in Montréal, focused on financing of $1,000,000 and more. We help developers structure construction and take-out financing together, and match each stage to suitable lenders from our network of over 20 lenders. Tell us about your project.