After years of structuring complex construction financing across Alberta, I've seen every mistake in the book. And here's the brutal truth: 73% of construction projects in Calgary go over budget, while 45% face serious cash flow crises that could have been avoided with proper planning.
Smart developers and builders are getting ahead of these issues in 2026. Here's what they're doing differently: and what you need to know before your next project.
Mistake #1: Botching Your Draw Schedule (And Bleeding Cash)
The Problem: You're either releasing funds too quickly to contractors or structuring draws that don't align with actual construction milestones. This creates a cash flow nightmare that puts your entire project at risk.
Most Calgary builders I work with initially structure draws around arbitrary timelines instead of completion stages. When your foundation contractor gets 40% upfront but only completes 20% of the work, you're now carrying unnecessary risk: and your lender starts asking uncomfortable questions.
The Fix: Work with an Alberta mortgage broker who understands progressive draw optimization. At Kraft Mortgages, we structure draws around verified completion milestones:
- 10% on foundation completion (not start)
- 25% on framing and roof completion
- 20% on mechanical rough-in completion
- 20% on drywall and interior completion
- 15% on final inspection and occupancy
- 10% holdback until warranty period ends
This protects your cash flow while giving contractors predictable payment schedules. Use our construction draw calculator to model different scenarios for your project.
Mistake #2: Ignoring Interest Reserves (The Silent Budget Killer)
The Problem: You're not planning for interest accumulation during construction, which can add $15,000-$50,000 to a typical Calgary project. Most builders focus on construction costs but forget that construction loans accrue interest from day one.
On a $800,000 construction project with a 12-month build timeline, you're looking at approximately $35,000-$45,000 in interest costs at current rates. Without planning for this, you're forced to either extend your construction timeline or tap into personal funds.
The Fix: Build interest reserves into your initial financing structure. Smart developers are now adding 15-20% to their total project budget specifically for interest and carrying costs.
Here's the calculation that works:
- Total construction cost: $800,000
- Interest reserve (based on 6.5% rate): $42,000
- Total financing needed: $842,000
We structure this so the interest reserve is available from day one, preventing cash flow crunches during critical construction phases.
Mistake #3: Underestimating Soft Costs (The $30,000 Surprise)
The Problem: You're budgeting for materials and labor but ignoring the dozens of "soft costs" that can easily add $30,000-$60,000 to your project. These include permits, inspections, legal fees, insurance, and utility connections.
In Calgary specifically, development permits alone can run $8,000-$15,000 for single-family homes, while utility connections often hit $12,000-$18,000. Add in architectural fees, engineering reports, and city inspection fees, and you're looking at serious money.
The Fix: Create a comprehensive soft cost budget before you apply for financing. Here's what Calgary builders are including:
- Development permits: $8,000-$15,000
- Building permits: $3,000-$6,000
- Utility connections: $12,000-$18,000
- Architectural/engineering fees: $15,000-$25,000
- Legal fees: $2,000-$4,000
- Insurance during construction: $3,000-$5,000
- City inspection fees: $1,500-$3,000
- Survey and geotechnical reports: $4,000-$8,000
Total soft costs: $48,500-$84,000 on average
Factor these into your initial financing request. Don't get caught needing an emergency loan modification six months into construction.
Mistake #4: Skipping the Contingency Fund (Project Killer #1)
The Problem: You're building with zero buffer for unexpected costs. Material price fluctuations, weather delays, or hidden site conditions can instantly blow your budget. Without a contingency fund, you're one surprise away from project failure.
Calgary's unpredictable weather alone accounts for 15-20% of construction delays. Add in supply chain disruptions that are still affecting material costs, and you need protection.
The Fix: Build a 15-20% contingency fund into your financing structure. This isn't optional: it's project insurance.
On an $800,000 construction project:
- Base construction cost: $800,000
- Contingency fund (18%): $144,000
- Total project budget: $944,000
Smart developers are also structuring contingencies in phases:
- 10% for general construction overruns
- 5% for material price escalation
- 3% for weather/delay costs
This gives you flexibility to handle specific challenges without derailing your entire project timeline.
Mistake #5: Choosing the Wrong Contractor (The $50,000+ Repair Bill)
The Problem: You're selecting contractors based on price instead of verified track record. In Calgary's competitive market, low-bid contractors often cut corners, leading to $20,000-$50,000 in repair costs and massive project delays.
Recent Calgary projects I've financed required complete foundation repairs ($35,000), electrical system replacement ($25,000), and flooring replacement ($18,000) due to poor contractor selection. These weren't budgeted costs: they were emergency repairs.
The Fix: Use these contractor evaluation criteria:
- Minimum 5 years Calgary-specific experience
- Verified references from recent projects (call them)
- Proper licensing and insurance coverage
- Financial stability (request credit checks)
- Detailed scope of work and material specifications
- Fixed-price contracts with penalty clauses
Factor contractor vetting into your project timeline. Spending an extra 2-3 weeks on contractor selection saves months of delays and thousands in repair costs.
Mistake #6: Over-Borrowing Beyond Realistic Capacity
The Problem: You're financing more than your actual cash flow can support, creating unnecessary financial stress. Many Calgary developers get caught up in market optimism and borrow against projected values instead of conservative estimates.
With Calgary's real estate market showing volatility, borrowing at maximum capacity leaves no room for market adjustments or construction delays.
The Fix: Use conservative debt-to-income ratios and realistic project valuations:
- Keep total debt service below 40% of gross income
- Base valuations on current comparable sales, not projected appreciation
- Factor in holding costs for unsold inventory
- Plan for 6-month sales timeline (not optimistic 30-60 days)
Work with a Calgary mortgage broker who understands local market conditions and can structure financing that matches realistic cash flow scenarios.
Mistake #7: Incomplete Documentation and Financial Projections
The Problem: You're submitting incomplete applications or unrealistic financial projections, leading to delays, rejections, or unfavorable terms. Lenders need complete, accurate information to structure appropriate financing.
Nearly 45% of construction financing applications in Alberta face delays due to incomplete documentation. This adds 2-4 weeks to your approval timeline: critical time in a competitive market.
The Fix: Prepare complete documentation packages before applying:
Required Documents:
- Detailed construction budget with line-item breakdowns
- Contractor agreements and payment schedules
- Architectural plans and engineering reports
- Municipal permits and approvals
- Realistic market valuations and comparable sales
- Personal and business financial statements
- Construction timeline with milestone dates
Financial Projections Must Include:
- Conservative sale price estimates
- Realistic construction timelines
- Complete soft cost calculations
- Interest and carrying cost projections
- Contingency fund allocations
Partner with mortgage professionals who understand construction financing complexities and can guide your documentation preparation.
Your Next Steps: Getting Construction Financing Right
The difference between successful Calgary construction projects and financial disasters often comes down to proper financing structure and planning. Don't let these seven mistakes derail your next project.
At Kraft Mortgages, we've structured construction financing for hundreds of Calgary projects. We understand local market conditions, municipal requirements, and the specific challenges Alberta builders face.
Ready to structure your construction financing properly? Contact our team for a consultation. We'll review your project details and create a financing strategy that protects your cash flow while maximizing your project potential.
Your construction project's success starts with the right financing foundation. Get it right from the beginning, and avoid becoming another cautionary tale in Calgary's construction market.
About Varun Chaudhry
Licensed mortgage broker with over 18 years of experience in the Canadian mortgage industry. Specializing in MLI Select, construction financing, and self-employed mortgages across BC, AB, and ON.