# What are the key risks in construction financing?

> Primary risks include: cost overruns (budget 10-15% contingency), construction delays affecting rate locks, builder insolvency (verify TARION/provincial warranty registration), and appraisal gaps between projected and actual completion value.

Category: Financing
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/financing/what-are-the-key-risks-in-construction-financing

## Answer
Primary risks include: cost overruns (budget 10-15% contingency), construction delays affecting rate locks, builder insolvency (verify TARION/provincial warranty registration), and appraisal gaps between projected and actual completion value. Lenders mitigate these through holdbacks, inspection requirements, and builder qualification criteria.

## Related guide
- https://ratellow.com/guides/construction-mortgages-canada

## Sources
- CMHC Progress Advance Program — https://assets.cmhc-schl.gc.ca/sf/project/cmhc/pdfs/factsheets/new/cmhc-quick-reference.pdf
- B-20 Construction Lending Standards — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#2.5.4