New Home Construction Loan are the most common form of building that requires  construction financing. 

Here in Ontario, we have may different construction loan programs to choose from, ranging for the more traditional institutional or bank financing programs to construction mortgages provided by private mortgage lenders.

The builder market right now favors private mortgage construction financing over institutional construction loans due primarily to a faster approval process and less terms and conditions.

Private loans do come at a higher cost of borrowing, but the added cost is offset by the benefit of a more streamlined and predictable process that is typically less administratively intensive.

New home construction financing can be secured by the builder or the actual home buyer.  For the builder, financing can be arranged on speculation of future sale whereby the house has not been sold at the time of construction, or it can arranged on a pre-sale basis where the contract for sale between the buyer and builder is in place before construction commences.

Currently private money loans make up over 80% of the overall market for construction financing.  Within the private market segment, there are different lending options that are provided by each private lending individual or group.  For instance, certain lenders will require that the first 20% of construction costs be paid into the project by the borrower before the lender will start advancing funds.  Other lenders will allow the borrower to invest their capital towards the end of project.

There are many other unique aspects to different offers that should be considered when comparing options.  Because of the large number of private lenders in Ontario, there can be considerable diversity in terms of what you can expect from one lender to the next for any given project.

Whether or not you’re a builder or home owner, or if you prefer an institutional lending solution to a private one, the best first step is to contact a mortgage broker that specialize in construction financing.

Lender selection is an important aspect of the project and you want to make sure that you’re got a financing partner that will work well with your particular situation.   I recommend that you give me a call so that I can quickly assess your options and work with you to select from the best available construction loans relevant to your situation.

Click Here To Contact Construction Financing Specialist Joe Walsh

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