Your land needs rezoning or subdivision before you can build — that's not the same loan as a construction mortgage

Construction and development financing sit at two completely different stages

A construction loan (covered on the construction-mortgage page) assumes the land is already buildable — zoning is right, permits can be issued, municipal services already reach the lot.

Development financing covers turning land into buildable land: rezoning, subdivision, negotiating servicing with the municipality — each of these costs money and takes time on its own, and none of it is guaranteed to be approved until it actually is.

The usual sequence is development first (turning raw land into ready land), then construction (building on that ready land) — two loans, two sets of lenders, two different risk assessments, not one loan split into two draws.

Why lenders look at the development stage more cautiously than construction

A construction loan's main risk is whether the project runs over budget or doesn't get finished. A development loan's risk is whether the land can actually become what you want it to be — and rezoning approval is largely outside your control; it's a municipal decision.

That means fewer lenders are willing to finance the pure development stage compared to construction, and terms tend to be more conservative: higher down payments are typical, and many lenders want to see at least preliminary municipal feedback or an application already in progress — "I think it'll get approved" on its own usually isn't enough for most lenders to move.

Once final approval comes through (rezoning approved, subdivision registered), the land's value and how lenders view it both shift meaningfully — which is why many developers treat "getting approval" as its own milestone worth financing separately to get through.

Municipal servicing costs are easy to leave out of the budget

Turning raw land into serviced land — bringing water, power, sewer, and roads to the property line — can be a significant cost, and it often needs to start before construction begins, sometimes even before final approval comes through.

Whether this cost is covered under a development loan varies by lender — worth listing as its own line item in the budget rather than folding it into "development costs" generally.

Once the land is subdivided, how financing is handled changes

Once land is formally subdivided into separate lots, each one can generally be handled on its own — kept to build on, sold outright, or financed separately with its own construction loan. All three happen in practice.

Moving from a pure development loan into a construction loan usually means going through approval again — it doesn't happen automatically. Same principle as the construction-mortgage page's point about needing a takeout mortgage after completion: every time the stage changes, the project has to prove itself again.

Which stage you're in now determines which kind of lender to approach

Land that hasn't been rezoned or subdivided yet, still moving through approvals — look for lenders who specifically finance the development stage, and ask about down payment, how progress funding is released, and whether preliminary municipal feedback is expected.

Rezoning or subdivision already approved, ready to break ground — that's when the construction-mortgage page's framework applies (staged draws, the 10% holdback).

Not sure which stage you're actually in — send me where the land stands (current zoning, whether an application has been submitted, how far along the municipality's process is) and it takes about ten minutes to say which path fits.

Common questions