Why Building in Surrey Just Got More Expensive — and What to Do About It

If you're a builder, developer, or homeowner planning a construction project in Surrey, you've probably noticed the same thing we have: the numbers are getting harder to make work. Material costs are climbing. Labour is tight. And the financing that was straightforward two years ago now requires navigating a maze of lender policies that seem to change by the month.

At Kraft Mortgages, construction financing is one of our core specialties. We've arranged construction mortgages across Surrey, the Fraser Valley, and Greater Vancouver for over 18 years — from single-family custom builds in South Surrey to 6-plex densification projects in Fleetwood. Here's what's changed in 2026, what it means for your project budget, and how to structure your financing so the numbers still work.

Key Takeaways

✅ Steel and aluminum tariffs (effective Sep 8, 2026) are pushing construction material costs up 5–15%
✅ CMHC MLI Select offers up to 50-year amortizations for multi-unit builds — a game-changer for cash flow
✅ Surrey's Bill 44 zoning allows 4–6 units on single-family lots — creating new financing opportunities
✅ Construction draw mortgages require a different approval process than purchase mortgages — budget, plans, and builder credentials matter first
✅ Working with a broker who knows which lenders have appetite for Surrey construction projects can save you 1–3% on your rate

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The Cost Equation: What's Driving Construction Prices Up in 2026

Three forces are converging to make building in Surrey more expensive than it was even a year ago. None of them are going away soon.

1. Steel and Aluminum Tariffs (September 8, 2026)

On September 8, Canada launched counter-tariffs on US steel, aluminum, and other goods in response to American trade measures. For construction, this hits directly: rebar, structural steel, aluminum framing, roofing materials, and HVAC components all face higher input costs. The Canadian Home Builders' Association estimates material costs could rise 5–15% on affected categories, with the full impact flowing through by Q4 2026.

Bruno Valko, VP of National Sales at RMG Mortgages, put it plainly: "This doesn't help a problem that already existed, which is the cost of construction to build a house, which has already been a challenge. Now it's even worse. You've got a conundrum where it's too expensive to build, and the prices could get to a level where it's too expensive for your average homeowner to purchase."

2. Labour Shortages in BC Construction

BC's construction labour market has been tight for years, and 2026 is no exception. Skilled trades — framers, electricians, plumbers, finishers — are in short supply across the Lower Mainland. The Surrey SkyTrain expansion along Fraser Highway is absorbing thousands of workers, pulling labour away from residential projects. Builders we work with report 10–20% labour cost increases compared to 2024, with longer wait times for trades to become available.

3. Higher Borrowing Costs for Construction Loans

Construction mortgages carry higher rates than purchase mortgages — typically prime plus 1–3% depending on the lender and project type. With prime at 4.45% and bond yields pushing fixed rates higher, construction financing in late 2026 is more expensive than it was during the low-rate era. But here's what most builders don't realize: the rate on a construction loan is temporary. Once the project is complete, you refinance into a take-out mortgage at standard rates. The key is structuring the construction phase efficiently so interest costs don't eat your margin.

Surrey Construction Cost Snapshot (September 2026)

Cost Category	2024 Baseline	2026 Estimate	Change
Custom home (per sq ft)	$300–$400	$350–$475	+15–20%
Townhouse (per sq ft)	$250–$325	$285–$375	+12–15%
Structural steel	Baseline	+8–12%	Tariff impact
Framing lumber	Baseline	+3–5%	Moderate
Skilled labour (hourly)	$45–$65	$55–$80	+15–25%

Estimates based on builder interviews, CHBA data, and Surrey project files. Actual costs vary by project scope, builder, and timing.

How Construction Draw Mortgages Work (and Why They're Different)

If you've only ever had a purchase mortgage, construction financing looks completely different. You don't get a lump sum at closing. Instead, the lender releases funds in stages — called "draws" — as construction milestones are completed.

Typical Draw Schedule for a Surrey Single-Family Build

🏗️ Draw 1: Foundation (15%) — Excavation, footings, foundation walls complete. Lender sends an inspector to verify before releasing funds.
🏗️ Draw 2: Framing & Lock-Up (25%) — Framing, roof, windows, doors installed. Building is weather-tight.
🏗️ Draw 3: Mechanical Rough-In (20%) — Plumbing, electrical, HVAC rough-ins complete. Drywall up.
🏗️ Draw 4: Interior Finishing (25%) — Flooring, cabinets, trim, painting, fixtures installed.
🏗️ Draw 5: Completion (15%) — Final inspection, occupancy permit issued. Property ready for take-out mortgage.

Percentages are approximate and vary by lender. Some lenders offer more granular draw schedules (7–10 draws) for larger projects.

The lender charges interest only on the funds that have been advanced — not the full loan amount. This is called "interest-only during construction." For a 12-month build on a $900,000 construction loan at prime + 1.5% (5.95%), the average outstanding balance might be $450,000, meaning your monthly interest during construction runs roughly $2,230 — not the $4,460 you'd pay on the full amount.

But here's the catch: construction loans are harder to qualify for than purchase mortgages. Lenders want to see:

📋 Detailed construction budget — line-by-line cost breakdown, signed by your builder
📐 Approved building plans — municipal permits or confirmation they're in process
👷 Builder credentials — licensed builder with track record; some lenders require 3+ completed projects
💰 Contingency reserve — typically 10–15% of the construction budget, held by the lender
📊 Appraisal — "as-completed" value, not current land value. This determines your loan amount

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Surrey's Construction Hotspots: Where the Opportunity Is

Not all Surrey neighbourhoods are equal when it comes to construction lending. Lenders have different appetites for different areas and project types. Here's what we're seeing in our files right now:

Lender Appetite by Surrey Neighbourhood (Fall 2026)

🏡 South Surrey / White Rock — Strongest lender appetite. High land values, established neighbourhoods, predictable resale. Best rates available. Custom builds and luxury renovations preferred.
🏗️ Clayton Heights / Cloverdale — Growing appetite for multi-unit. Bill 44 zoning allows 4–6 units. Lenders like the densification play. CMHC MLI Select available.
🏘️ Fleetwood / Guildford — Strong for single-family and duplex builds. Established neighbourhoods with consistent demand. Some lenders restrict if within SkyTrain construction zone.
🏢 Newton / Whalley — Mixed appetite. Higher-density projects near SkyTrain stations attract lender interest. Single-family in older pockets may need B-lenders or equity lenders.
🌾 Panorama Ridge / Rural Surrey — Limited lender appetite for construction. Acreage properties with septic/well systems face extra scrutiny. May need private or specialized lenders.

The MLI Select Advantage: Why Multi-Unit Builds Are the Smart Play

CMHC's MLI Select program is the single most important financing tool for Surrey builders in 2026. It offers mortgage loan insurance for multi-unit residential properties (5+ units) with benefits that fundamentally change the math on construction projects:

MLI Select Benefits for Surrey Builders

✅ Up to 50-year amortization — dramatically lowers monthly payments and improves cash flow on rental projects
✅ Up to 95% loan-to-value — less equity required upfront, more leverage for your next project
✅ Lower mortgage insurance premiums — points-based system rewards affordability, energy efficiency, and accessibility
✅ Portfolio flexibility — combine multiple properties under one mortgage for efficiency
✅ Federal program — available across BC, Alberta, and Ontario, not restricted by provincial rules

Here's a real example of how MLI Select changes the numbers. A builder purchases a single-family lot in Fleetwood for $1.2 million with plans to build a 4-plex. Construction cost: $1.6 million. Total project cost: $2.8 million.

MLI Select vs Conventional: Fleetwood 4-Plex Comparison

	Conventional	MLI Select
Loan amount (75% LTV)	$2.1M	$2.52M (90% LTV)
Amortization	25 years	40 years
Rate (5-year fixed)	4.69%	4.44%
Monthly payment	$11,900	$11,232
Monthly rent (4 units @ $2,800)	$11,200	$11,200
Monthly cash flow (at 100% of rent)	-$700	-$32

Assumptions: 4 units at $2,800/month rent, 40-year amortization under MLI Select vs 25-year conventional, rates as of September 2026. This is an illustrative comparison — actual terms depend on credit, income, and project specifics.

The conventional deal is cash-flow negative by $700/month at 100% occupancy. The MLI Select deal is roughly break-even at -$32/month. Over 5 years, that's the difference between losing about $42,000 and wiping your face — plus you've built equity on a $2.8 million asset. And note that MLI Select gets you there with $420,000 less of your own cash in the deal, because of the higher loan-to-value.

Bill 44: How Surrey's New Zoning Creates Financing Opportunities

British Columbia's Bill 44 — the Small-Scale Multi-Unit Housing (SSMUH) legislation — requires municipalities to allow 3–6 units on lots previously zoned for single-family homes. Surrey's compliance means thousands of lots in Fleetwood, Guildford, Newton, and Cloverdale are now eligible for densification.

This changes the financing conversation. A $1.2 million lot with a 1950s bungalow was a tear-down for one new house. Now it's a development site for a 4-plex or 6-plex. The construction budget goes up — but so does the completed value and the rental income.

Lenders are still catching up to Bill 44. Some won't lend on projects that rely on the new zoning until there's a track record of completed builds. Others — particularly credit unions and monoline lenders active in BC — have already updated their policies. A broker who knows which lenders are Bill 44-ready can save you months of dead ends.

Real Deal: Aman, Fleetwood Builder, 6-Plex Densification

Aman owns a 7,200 sq ft lot in Fleetwood with a 1970s bungalow. Under old zoning, his options were: renovate, tear down and build one new house, or sell. Under Bill 44, the lot now allows 6 units.

We structured a construction draw mortgage: land value $1.15M (already owned free and clear), construction budget $2.1M for a 6-plex (six 2-bedroom units, ~900 sq ft each), total project $3.25M. We placed the construction financing with a credit union at prime + 1.25% during the build phase, with a commitment to refinance into CMHC MLI Select upon completion at a 40-year amortization.

Projected completed value: $4.2M. Projected rent roll: $16,200/month ($2,700/unit). At an MLI Select take-out sized to 80% of the as-completed value ($3.36M at 4.44% over 40 years), the mortgage payment is approximately $14,976/month — leaving roughly $1,200/month positive cash flow on day one at full occupancy, plus about $950K in forced equity from the build.

Names and identifying details changed. Real numbers from our Surrey files, September 2026.

Construction Financing Options: A-Lender vs B-Lender vs Private

Not all construction projects fit the same financing box. Here's how the three tiers break down for Surrey builders in 2026:

A-Lenders (Banks, Credit Unions, Monolines)

✅ Best rates: Prime + 0.5% to Prime + 2%
✅ Requirements: Strong credit (680+), proven builder, detailed budget, 20%+ equity
✅ Best for: Experienced builders, standard single-family or duplex projects, borrowers with clean financials
⚠️ Limitation: Slow approval (4–6 weeks), rigid documentation, won't touch unconventional projects

B-Lenders (Institutional Alternative Lenders)

✅ Moderate rates: Prime + 2% to Prime + 4%
✅ Requirements: Acceptable credit (600+), reasonable budget, 25%+ equity
✅ Best for: Self-employed builders with non-traditional income, first-time builders, projects in emerging areas
⚠️ Limitation: Higher rates, 1–2% lender fees, shorter terms (1–2 years typical)

Private Lenders

✅ Higher rates: 8–12%, interest-only payments
✅ Requirements: Equity-based — the land is the security. Credit and income matter less
✅ Best for: Distressed projects, quick closes (1–2 weeks), credit challenges, unconventional builds
⚠️ Limitation: Expensive. Should have a clear exit strategy (refinance to A/B lender upon completion)

Five Mistakes We See Surrey Builders Make with Construction Financing

Mistake #1: Getting the Appraisal Before Securing Financing

Different lenders use different appraisers. Some lenders have approved appraiser lists. If you order an appraisal from the wrong firm, the lender may reject it and require a new one — costing you $750–$1,500 and 2–3 weeks. Always confirm the lender's appraisal requirements first.

Mistake #2: Underestimating the Contingency Reserve

Every construction project goes over budget. It's not a question of if — it's by how much. Lenders typically require a 10–15% contingency reserve held back from the loan. If your budget is $1.5M, the lender may only fund $1.275M (85%) until the project is complete and on-budget. If you don't have cash reserves to cover overruns, the project stalls — and stalled construction projects are the hardest to refinance.

Mistake #3: Choosing the Wrong Lender for the Project Type

A lender who's great at single-family construction may have no appetite for a 6-plex. A credit union that dominates in South Surrey may not lend in Clayton Heights. We see builders waste months applying to lenders who were never going to approve their project. A broker who knows lender appetites by project type, neighbourhood, and builder profile can pre-filter the list before you spend a dollar on applications.

Mistake #4: Not Planning the Take-Out Mortgage Before Starting Construction

The construction loan is temporary. The take-out mortgage is permanent. If you can't qualify for the take-out at current rates, the construction lender won't fund the project — they need to know they'll be repaid. We pre-qualify every construction client for their take-out mortgage before we submit the construction application. This is the single biggest difference between a smooth build and a financing crisis at completion.

Mistake #5: Waiting to Talk to a Broker Until the Plans Are Done

The best time to involve a mortgage broker is before you buy the land — or at minimum, before you finalize the building plans. We can tell you which lenders will fund your project, what they'll lend against the as-completed value, and what documentation they'll need. Changing plans after they're drawn costs thousands. Getting the financing parameters right before you start costs nothing.

FAQ: Construction Financing in Surrey

Q: How much down payment do I need for a construction mortgage?

For a standard construction loan, expect 20–25% of the total project cost (land + construction) as equity. If you already own the land free and clear, that land value counts as your equity. For CMHC MLI Select multi-unit projects, you may qualify with as little as 5–10% down. The exact amount depends on your credit, the project type, the lender, and the as-completed appraisal value.

Q: Can I get a construction mortgage if I'm self-employed?

Yes — but the lender pool shrinks. A-lenders want 2 years of NOAs showing stable income. B-lenders may accept bank statement programs, stated income, or focus more on the project's viability than your personal tax returns. Many of Surrey's builders are self-employed — we place these files regularly with lenders who understand the construction business. The key is having a detailed budget, a credible builder, and realistic as-completed value projections.

Q: How long does construction financing take to approve?

A-lenders: 4–6 weeks from application to approval. B-lenders: 2–4 weeks. Private lenders: 1–2 weeks. The timeline depends more on how complete your documentation is than on the lender. A clean package — detailed budget, approved plans, builder credentials, appraisal — can close in 3 weeks with an A-lender. A messy package takes months regardless.

Q: What happens if my construction project goes over budget?

This is what the contingency reserve is for. Most lenders hold back 10–15% of the construction loan as a contingency. If costs exceed the budget, the contingency covers the overrun — up to a point. If the overrun exceeds the contingency, you need to inject additional cash. This is why an accurate, realistic budget is the most important document in your application. We review every budget line with builders before submission — an overly optimistic budget that blows up mid-construction is worse than a conservative one that leaves headroom.

Q: Are construction loan rates higher than regular mortgage rates?

Yes — typically 1–3% higher during the construction phase. But remember: this is temporary. You only pay the higher rate during the build (usually 12–18 months). Once the project is complete and you refinance into a take-out mortgage, you're back at standard rates. The construction rate premium is the cost of the lender taking on construction risk. What matters more is the take-out rate and amortization — a 50-year MLI Select amortization at 4.44% can more than offset a 1% construction rate premium over 12 months.

Q: Can I use the equity in my current home to fund a construction project?

Yes — this is one of the most common strategies we structure. If you own a home with substantial equity, you can refinance or take out a HELOC to fund the land purchase or down payment on a construction loan. Some builders use their primary residence equity to buy the lot, then use the lot as equity for the construction loan. This is called "equity cascading" and it's how many Surrey builders fund their first few projects without large cash reserves.

Q: Does Bill 44 actually help with financing, or is it just zoning on paper?

It helps — but only with lenders who've updated their policies. Bill 44 means a single-family lot is now legally a multi-unit development site, which increases its as-completed value and rental income potential. Both of those directly improve your financing numbers (higher loan amount, better debt service coverage). The catch: not all lenders have caught up. We know which ones have — and which ones will waste your time. For a Fleetwood or Clayton lot that now allows 4–6 units, Bill 44 can add $200K–$400K in lendable value compared to the old single-family zoning.

Construction Financing in 2026: Building in Surrey When Costs Keep Rising