Why Refinance A Canadian Mortgage?

“Understanding Mortgage Refinancing Logic”

First, to clarify, the most common form of mortgage refinancing involves paying out an existing mortgage with the funds provided by a newly created mortgage now registered against the same property.

The new mortgage can be for a greater amount than the previous mortgage.  The additional funds can be used for almost any purpose.  Just remember that there will need to be sufficient equity in the property to allow for an approval of the higher mortgage amount.

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At the time of writing in January of 2010, mortgage rates are at or near record lows with the potential for rate increases from this point forward more likely than further interest rate drops.  So one of the main reasons for mortgage refinancing is to secure a lower interest rate that will allow you to reduce your interest costs over time. The decision to do so is driven by the economic benefit of paying less interest.

Another main reason for mortgage refinance is to consolidate debt. In this situation, the new mortgage will be approved for a larger amount than the old mortgage being paid out and the additional funds acquired will be used to pay down other debts that the borrower holds.

The key benefits of this refinancing action is that the weighted average interest rate of the collective debt will be reduced and debt repayment will be spread out over a longer period of time.

Mortgage refinance related to consolidating debts is a powerful method to eliminate costly short term consumer financing that can drain available cash flow and destroy personal credit.

While debt consolidation is by far the biggest reason for securing additional funds through refinancing, there are many other uses of funds that can motivate a home owner to refinance their mortgage.

This is not meant to be an exhaustive list, but other uses of additional funds are for such activities as investing in a stock portfolio, financing the acquisition of investment property, financing your educational costs or those of a family member, home renovations, mortgage consolidation of two or more mortgages registered against the same property, and so on.

As the equity in your home grows, so does your potential access to funds for a wide variety of purposes.

To make sure that you’re getting the best value out of your mortgage for the least amount of cost, I recommend that you give me a call at least once a year so that we can review your mortgage against the market to see if there are any opportunities to lower your cost of borrowing and/or improve your repayment terms.  And if you’ve got other financing requirements that could benefit from a Canadian mortgage refinancing, we can certainly discuss those as well.

Click Here To Speak With Joe Walsh, Mortgage Refinancing Specialist

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House and Home Construction Loans

“Different Types Of Borrowers Of Home Construction Loans”

Construction financing for house and home construction loans are the most common form of construction finance in Ontario.  With the large numbers of new houses that get built each year, it only stands to reason that there would be considerably more construction mortgages for residential construction than for anything else.

The actual borrowers for home construction projects can range from the builder, the new home buyer, and existing property owners.

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The builder can purchase residential lots and acquire a construction loan against their equity in the property. A builder construction mortgage is really no different from other types of construction loans, other than, based on a previous track record, a builder may be able to acquire high leverage ratios and better terms from lender they are giving repeat business to.

A builder may secure construction financing on speculation of selling the house in the future as well or after a buyer contract has been secured whereby a prospective home owner enters into a contract to purchase the house at the completion of construction.  The buyer down payment and purchase contract can provide the builder with additional leverage for securing construction loans with more optimal terms.

New home buyers can also acquire a home building mortgage.

In this scenario, while there is likely going to be a third party builder involved, the ownership of the actual property and the responsibility of securing and managing the construction financing capital is that of the home buyer.

This may perhaps be the most risky form of a home building loan in that the new home owner has to either do the construction project management themselves or pay someone else to do it.

In most cases, the new home purchasers will fill this role in order to minimize costs.

Project management can be very challenging for any type of construction and even more so for individuals who likely have never done it before.  So its always a good idea for these types of borrowers to have a contingency allowance available for costs that are missed or unexpected as well as a detailed construction budget and construction timeline.

The third type of borrower is one who owns a house and is looking to expand or renovate and requires a house construction loan to fund the project.  The scope of these types of projects don’t tend to be as large as the first two scenarios (although they can be) so the related project management and construction loan requirements are also likely to be less extensive as well.

For home renovation loans, the dollar amount may be low enough for the financing to be done via an existing home line of credit eliminating the need for a new construction loan to be put in place.

Depending on your lending profile and the specifics of your construction project, there may be several home construction loan options to consider.

These options can range from low cost institutional lending sources to slightly more closely and potentially higher leverage private lenders.

Because there can be several construction loan sources to choose from, its important that you spend you time only considering the most relevant sources so that you can get your project started on time and have comfort in knowing you’re going to be dealing with a lender that is easy to work with.

To get the best construction mortgage advise as to how to approach lenders, how to secure Ontario home construction loans, and manage the overall cash flow of the project, I would recommend that you give me a call and I’ll quickly assess your situation for free and provide you with relevant options for you to consider.

Click Here To Speak With Home Building Loan Specialist Joe Walsh

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Ontario Construction Mortgage Lenders

“Selecting The Right Construction Lender For Your Project”

There are a large number of construction mortgage lenders in the province that provide construction financing resources to builders, property buyers, and property owners.

Each mortgage lender will tend to have a unique construction finance focus whether it be residential homes under $500,000 in value, commercial buildings under $1,000,000, mutli unit complexes, and so on.

The market for Ontario construction mortgage lenders is further split up into institutional lenders (banks, credit unions, trust companies) and private lenders.  Institutional lenders are typically lower leverage and lower costs.  To utilize an institutional source of construction finance, the borrower will typically have high amounts of equity in the project.  When higher leverage is required, the private market has a number of lenders with their own financing models that can be utilized.

Availability and diversity of construction lenders is directly related to population concentration whereby the Greater Toronto Area (GTA) has significantly more construction lenders than the outlying areas.

Part of the reason for this is due to the fact that private lenders tend to work on more of a regional basis, maintaining coverage of relatively small geographic areas.  The rationale for this approach by privates is because many of them want to personally visit the properties and be close enough to inspect the construction progress themselves.

And regardless where you are located in Ontario, private lender tends to be more regional than provincial in nature, so the more remote your location, the less private lending sources that will be available.

Two of the key areas a construction lenders will evaluate prior to providing a mortgage commitment is 1) does the construction project have a take out financing strategy to pay out the construction loan at the end of the project, and 2) what is the resale market for the completed construction project.

In regards to the first question, a long term take out mortgage doesn’t necessarily need to be arranged prior to starting construction, but from the construction lenders point of view, there has to be strong evidence in the market that options for a take out mortgage are available for the specific project and location.

With respect to the second question, the potential resale value of the construction project helps establish the real underlying value of the real estate security to the construction mortgage lender.  If there is a very thin or even non existent real estate market for the project, it will be much more difficult to secure construction financing, and any construction loan that is provided will come with more aggressive and restrictive terms including higher rates and tighter advance requirements.

While there are many lenders available, there can be large differences in that way they manage their businesses and the patience levels they may have with project delays or any construction related issue that could arise which impacts the lending facility.

Therefore, its very important to work with an Ontario construction mortgage lender that’s not only interested in providing funding, but also one that has a solid reputation for working effectively with borrowers to get projects completed.

The best way to assure that 1) your focused on the right construction financing program for you construction project, and 2) working with a construction lender that’s going to be prepared to work with you should anything unforeseen occur is to utilize the services of a mortgage broker that specializes in construction mortgage financing projects.

Your best first step is to give me a call so that I can quickly assess your situation and provide you realistic options to consider.  From there, I will help you determine what course of action makes the most sense and manage the administration process to get everything in place.

Click Here To Speak Directly With Joe Walsh, Construction Mortgage Specialist.

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