MBL Developments · Published 2026-08-09 · All insights
Why 95% Financing Does Not Mean 5% Cash: The Real Equity a Sixplex Requires
The short answer: CMHC MLI Select's "up to 95% loan-to-cost" is real — and a first-time sixplex developer should still plan on roughly $500–700k of cash moving through a Toronto project. The gap between "5% of cost" and reality isn't fine print malice; it's timing, eligible-cost definitions, coverage sizing, and the simple fact that the insured facility arrives after the land does. Anyone selling you "5% down development" is selling you the ceiling as if it were the floor.
Updated August 2026 · MBL Developments Research · Primary source: CMHC — MLI Select · Illustrative figures — every project and lender differs.
Four different things people call "the money" — define them first
- Equity — capital permanently at risk in the project, below all debt
- Bridge debt — the land loan that carries the property until the insured facility arrives (borrowed, not equity — but you must qualify for and service it)
- Cash moving through the project — everything the sponsor side actually writes cheques for, whatever it's later called
- Committed liquidity — money the lender requires you to show above the modelled peak, which may never be drawn
The table below tracks the third one — cash through the project — because that's what a first-timer actually has to have. This is an illustrative financing structure: CMHC sets the program parameters, but individual lenders determine loan sizing, eligible costs, documentation and advance conditions.
Where the cash actually goes — an illustrative ~$3.4M project
| Phase | What needs cash | Illustrative amount |
|---|---|---|
| Land closing (month 0) | Equity over the land bridge (~30% of purchase), land transfer tax, closing, retainers | ~$400k+ |
| Pre-construction (months 1–7) | Drawings, permits, energy modelling, CMHC application, bridge carry, insurance | ~$150–200k |
| Peak cash deployed | Before the insured facility advances a dollar | ~$550–650k |
| First insured advance (months ~8–14) | Facility takes out the land bridge and recognizes eligible costs to date | large inflow — but see below |
| Construction | Lender-funded draws against certified work; the statutory 10% holdback rides until after completion | modest ongoing |
| CMHC premium + PST | Cash cost of the insurance itself | ~$150–190k (inside the totals above) |
Why the headline misleads
- The 95% applies to eligible costs, as the lender defines them — not necessarily every dollar you actually spent. The difference is yours to fund.
- Coverage sizes the loan too. The insured loan must also clear a debt-coverage floor at the project's rents; where coverage binds before 95% does, the loan is smaller and the equity is bigger. "Up to" is doing heavy lifting in that sentence.
- Sequencing is the real cash story. The facility funds against completed milestones — but land closes on day one. Everything before the first advance is your capital (or your bridge lender's), which is why the peak cash need lands near month seven, not at the end.
- The premium is cash. The insurance that makes the program work is a six-figure line paid, not waved.
- Buffers are underwritten. Lenders want committed liquidity above the modelled peak — a cushion you must show, even if it's never drawn.
The honest comparison — still a great deal
Conventional construction at 65–75% LTC on the same project traps $900k–1.2M+ of equity, often until stabilization years later. The insured route's ~$550–650k peak, with capital working hardest for only the first year or two, is dramatically better. It's just not 5%.
Frequently asked questions
Can partners or investors fund the equity? Commonly, yes — structured properly with counsel. The equity being fundable doesn't make it smaller; someone still writes the cheques on day one.
Does experience change the number? Experienced sponsor groups get better eligible-cost treatment, faster advances, and smaller demanded buffers. First-timers should budget the conservative end.
What's the single most expensive misunderstanding? Signing land unconditionally while assuming the insured facility funds the purchase. It doesn't — the land phase is yours to carry, and the application requires completed drawings you don't have yet on closing day.
the MBL underwriting & development program → — our program and Deal Lab includes the full cash-flow timeline and draw-schedule templates for exactly this planning. Join the waitlist on the program page.