Construction money is expensive. Your equity isn't.
Every builder knows the price of construction capital: draw mortgages with fees on every facility, inspections before every advance, interest reserves, and private pricing whenever the timeline gets creative. It's the cost of doing business — but it shouldn't be the cost of ALL the business.
Most builders are sitting on a cheaper source of capital and treating it as furniture: the equity in their own home, a rental, or the company shop. A residential property refinances to 80% of value; commercial goes to 75%. The proceeds are yours to deploy — land deposits, mobilization, cost overruns, finishing a spec — at mortgage pricing instead of construction pricing.
Three properties of this money make it different from every other dollar on a job site: it's tax-free to pull (borrowing against your own asset isn't income), it can be penalty-free (time it to a renewal), and on residential A-lender files it carries zero financing fees — the lender pays us, not you.
The math on a real example
A builder owns a $1,400,000 home in Langley with $500,000 left on the mortgage, renewing this fall. A new first mortgage at 80% of value is $1,120,000 — which pays out the old balance and releases $620,000 gross.
Because it funds on the maturity date, the penalty is zero. Because it places A-side, the financing fees are zero — the only costs are roughly $2,500 of legal and an appraisal, so about $617,000 lands in the account. The new payment at 3.74% over 30 years is $5,162 a month.
That $617,000 walks onto the next project as equity. The construction facility gets smaller, the draws get fewer, the fee base shrinks, and the lender sees a sponsor with real skin in the land — which is exactly the file that gets approved quickly. The blended cost of the whole capital stack drops, usually by a wide margin, because the biggest slice now prices as a mortgage instead of as construction risk.
Run your own numbers in theequity take-out calculator— both paths, penalty and fees included, down to net cash in hand.
Where builders actually deploy it
The use cases we fund most often across Metro Vancouver and the Fraser Valley:
- →Land deposits and closings that can't wait for a construction facility to set up — equity cash closes in weeks
- →Mobilization: excavation, permits, insurance and first trades funded before the first draw releases
- →Cost overruns handled quietly — without reopening the construction facility or inviting a mid-project renegotiation
- →Finishing spec inventory so it sells finished instead of discounted-unfinished
- →Bridging the 10% holdback sitting frozen through the lien period
- →Equipment purchases that would otherwise price at equipment-finance rates
More construction debt vs your own equity
When a build needs another $500,000, there are two places to find it — and they are not priced the same:
| Attribute | Expanding the construction facility | Pulling equity from property you own |
|---|---|---|
| Pricing | Construction / private draw pricing | Mortgage pricing — A-side when the file allows |
| Fees | Lender + broker fees on the facility, every time | Zero on residential A-lender files; commercial carries fees once |
| Access to funds | Draw schedule, inspections, holdbacks | Cash in the account from day one |
| Penalty timing | N/A — but facility resets cost money | Zero when timed to a renewal (lockable 120 days ahead) |
| Tax on proceeds | None — it's borrowing | None — it's borrowing; interest used for the business is generally deductible (confirm with your accountant) |
| Lender's view of you | Higher-leverage project | Sponsor with real equity in the deal — files fund faster |
The fee reality, in plain numbers
This is where builders get burned by vagueness, so here is our schedule, plainly. Residential equity take-out through an A lender: no brokerage fee, no lender fee — the lender pays us. Residential through alternative or private lanes, and every second mortgage: fees apply, with minimums of $2,500 for brokerage and roughly $2,500 for private lender fees.
Commercial equity take-out always carries fees — brokerage from 1% with a $10,000 minimum, plus lender fees by lane — because commercial lenders don't pay broker compensation. Every file is quoted in writing before anything is signed, and the equity take-out calculator applies these exact numbers, minimums included, so the net-cash figure you see is the one that lands.
What to have ready
Equity files move fast when the package is complete. Have these ready and funds can be positioned before the next project needs them:
- →Mortgage statements and renewal dates for every property you own — renewal dates are the goldmine; a maturity in the next 120 days means penalty-free money
- →A current sense of each property's value (we'll order the appraisals)
- →The project budget the funds are feeding — lenders fund purpose faster than vagueness
- →Corporate financials or bank statements if income is stated — builder income is project-based, and we place it with lenders who underwrite it that way
FAQ
Is pulling equity out for construction really tax-free?+
Yes — refinancing releases borrowed money secured by your own asset, and borrowed money is not income, so there is no tax on the proceeds. When the funds are used in the business or to earn income, the interest is generally deductible too — structure that piece with your accountant, and keep the borrowing traceable to the project.
My bank already declined me because builder income looks lumpy.+
Standard problem, standard fix: stated-income and project-based underwriting exist at alternative lenders, credit unions and private capital — qualification runs on what the business actually earns and the equity in the property, not on a smooth T1. A bank decline is one lender's opinion of one presentation of the file.
What if my mortgage isn't at renewal yet?+
Then it's a math question, not a guess: the equity take-out calculator prices the break penalty against a no-penalty second mortgage side by side, down to net cash in hand. Sometimes the penalty is smaller than a month of construction-facility fees; sometimes the second wins until the renewal window opens — 120 days before maturity, a penalty-free switch can be locked.
How fast can funds land?+
Second mortgages: often 1–3 weeks. A-side refinances: typically 2–4 weeks with a complete package. The smart play is positioning the equity BEFORE the project needs it — money sitting ready costs interest only when drawn into use, but money arranged in a panic prices like panic.