Archive Monthly Archives: March 2010
How To Get an Institutional Mortgage On A Seasonal Cottage
“Yes, There Is A Way To Still Get a Great Mortgage Rate on A Seasonal Cottage”
Find and securing cottage mortgage financing can be difficult for many situations, but can be particularly hard at times if you’re trying to get bank mortgage rates on a seasonal cottage property.
In many cases, the seasonal cottage properties will not even be considered by what we would refer to as “A” mortgage lenders and dropping down to a “B” institutional option or even a private mortgage option is going to be more expensive with respect to the interest rate and the long term debt service.
There is a way around this, but you need to be working backwards so to speak from the requirements of the mortgage programs that will consider seasonal cottages in the first place. Too often borrowers believe that if they find that perfect vacation spot that there will be a way for the larger mortgage lenders to fit your potentially unique request into their programs.
Unfortunately, lenders are historically inflexible on changing any of their requirements for a specific type of asset and loan program, so if you don’t fit the box you don’t get funded and may have to settle for a higher interest rate option.
The good news is that there are traditional “A” lenders that will consider seasonal properties under the following two key conditions.
First, the property needs to have running water and septic set up and operational. Second, the borrower needs to be able to qualify for Canada Mortgage and Housing Insurance.
There will be other lesser requirements, but bottom line, you can still get excellent mortgage rates on your vacation property if you figure out your financing approach “before” you start looking at cottages.
The key is to work with a mortgage broker to get pre qualified for an institutional mortgage on a seasonal cottage property in a particular area. That way, you’ll be well versed in what the exact requirements of the financing program are and can use this information as a pre screening tool when looking at properties to buy.
If you’re currently looking for a cottage property, have a one that requires mortgage financing, or are just planning ahead, please give me a call so we can get a plan in place that will get you financed and into your vacation home so you can start enjoying the summer months.
Canadian Mortgage Rates Are On The Rise
“Chartered Banks Take The Lead In Announcing Long Term Mortgage Rate Increases”
With the Royal Bank and TD Canada Trust Leading the way, CIBC announced today that they are following suit and have increased their long term fixed residential mortgage rates.
While there will be slight variations among the players, the basic rate increase will go like this:
- 20 basis points on the three year fixed rate
- 40 basis points on the four year fixed rate
- 60 basis points on the five year fixed rate
In the current market, this is viewed to be a pretty aggressive rate hike that was potentially been fueled by the Bank of Canada stating recently that they may be raising their over night lender rate soon.
And even though the central bank still says they are committed to keeping interest rates down, there appears to be enough inflationary pressure in the market right now to push the prime lending rate up as the primary goal of the central bank is to keep inflation at or below 2%.
While not all mortgage lenders have announced an increase in their rates, you can bet that everyone else is going to fall into line in the coming days. So while there may still be some short term opportunity to get the old rates, its likely not going to last very long.
And this may not be the last fixed mortgage rate increase we see this year. As the general economy continues to recover, there is a very good chance an additional rate hike could be seen in the coming months.
But then again, it may not. Interest rates can be very hard to predict at the best of times, but under the current economic conditions where many will argue that rates are being kept artificially low, the ability to forecast with any sort of accuracy is really out the window.
Bottom line is we now have the first significant rate move in over a year and rates in general are more likely to increase further, its just a matter of when and how much.
If you’d like to better understand how the rate increases may impact a mortgage financing decision you’re looking at, please give me a call and we’ll work through the relevant scenarios and math together to see what makes the most sense for your situation and requirements.
Construction Loan Application Requirements
“Here’s a List of The Primary Information Required by Construction Mortgage Lenders For Both Residential and Commercial Projects.”
Before you apply for construction financing, here is a basic checklist to follow of what the construction mortgage lender is going to want to see as part of your application request.
Your construction loan will get approved a lot faster if all of these items are covered off properly prior to making a formal application for funding.
And regardless of whether you’re project is residential or commercial, its likely that all the following are going to be required in some shape or form when applying for construction mortgage financing.
- Construction Approach. The lender is going to want to know who is going to be doing the building and what their related qualifications are. As an example, will the project be using a turn key builder, a general contractor, or will the borrower be conducting a self build utilizing sub trades where required.
- General Application Information. All lenders are going to want to know who they are dealing with and will require an individual borrower or corporate borrower to complete a construction mortgage application form. This can include the personal net worth statement of the main individuals involved as well as individual and business credit profiles.
- Plans, Drawings, and Permits. Completed and approved drawings and plans will be required to clearly represent what is being built, how its going to look upon completion, and that the proposed building project is approved by the appropriate authorities. Construction financing requests can be considered without everything being finalized, but nothing is going to be disbursed or advanced against a construction mortgage until all approvals are in place.
- Construction Budget. While you may be able to get away with a fairly basic budget summary, the more detail you put into the budgeting process, the more credibility you establish with the lender. This also can go along way to avoiding cash flow problems down the road via items that are missed, cost overruns, etc. Be prepared to provide support for the major cost items including signed price quotes from suppliers.
- Building Time Line. This is another area where more detail can benefit you in a number of ways. The main benefit is for the lender to clearly understand what components will be completed at each stage so that accurate draw schedules can be set up. More detail can greatly assist project management which will help keep the project on track and avoid any delays that inevitably cost money.
Each construction project is going to have its own unique features which may lead to additional lender requirements, but for the most part, any residential or commercial construction loan request will need to include the items listed above.
To learn more about how to increase your chances of getting the construction financing you’re looking for, give me a call and we can go through your project and requirements together.
Click Here To Speak With Joe Walsh, Construction Mortgage Broker.
Benefits Of Mortgage Pre-qualification
“If You Have The Time, It Makes A Great Deal Of Sense To Get a Mortgage Pre-Approval”
I’m not sure why, but with most things where financing is required, the borrower will seek it towards the end of the transaction, which usually causes the decision making process to get rushed as time likely is going to be more of a factor as you get closer to the end of any buying process.
This behavior is also very common with mortgage financing requests.
And while a mortgage can be arranged and closed rather quickly, there are some real advantages to getting a pre-approval in place prior to even starting your real estate shopping including:
- Budget Establishment. There’s nothing like a spending budget to focus the buying process. Many times home buyers will be looking at too broad a price range of homes to cover their basis as they aren’t exactly sure what amount of mortgage financing they will qualify for. By applying for a pre-approval the mystery is removed and the shopping process tends to become more focused and progress faster with a clear spending limit in place.
- Rate Security. With a pre-approval, rates can be secured for an extended period of time, making sure that you don’t miss out on existing rates if there is an interest move that goes against you while you’re looking. It also allows you to take advantage of any drops in rates between the time of the pre-approval and mortgage closing.
- Buying Power. Having a pre-approval is almost as good as cash in your hand, so it puts you in a position of offering more aggressively on target properties knowing that the financing is available to close the deal. It also allows you to make an offer without financing conditions, which will get the attention of sellers, especially for prime properties that are likely not going to be on the market long.
- Closing Power. Nothing is more disappointing than a good deal that gets lost because there was some type of financing snafu that stopped you from getting financing in place in time and the deal being lost to the next people standing in line to snap up the property. With a pre-approved mortgage in place, the process moves basically from accepted offer to the closing process, getting the deal done and the packing underway.
If you are even remotely considering buying a home in the near future, I recommend that you give me a call so that we can go over you mortgage options and take advantage of the time allowed to get the best option pinned down and a pre-approval in your hands so that whatever you decide to do, the financing will be covered off and not pose any challenge to getting any opportunity you come across.
Cottage Country Mortgage Options
“There Can Be Many Different Financing Strategies To Consider For Financing or Refinancing a Cottage Property”
Ah yes. It looks like spring has arrived in Ontario.
And with spring fever comes the cottage season as well as cottage construction, refinancing, and buying and selling of existing cottages.
Especially in Ontario, where we have a very well established cottage market, the mortgage options available are considerable as well as the various financing strategies you can consider to get a mortgage in place that meets your needs.
The challenge is that almost all cottage mortgage applications require somewhat of a customized mortgage financing solution depending on their location, resale market potential, and the financial profile of the borrowers.
And while there are lots of lending options, it can be easy to secure what I would call a sub optimal mortgage that allows you to close a deal or get refinanced, but is potentially not the best option that was even available to you in the market place, creating unnecessary costs for you over time in lender fees, higher interest rates, and the need to refinance in the future sooner than later.
This is where utilizing the services of a mortgage broker, especially one that’s done some cottage financing, can provide great value to you. As a mortgage broker myself, I am definitely biased in this regard, but I do believe that the knowledge and experience you can put to work for you can create a significant financial benefit that in most cases doesn’t cost you anything as most cottage lending scenarios have the lender paying the broker directly.
The key is to pick a mortgage broker that you are comfortable with and can work through the different scenarios with you until you come up with a solution that meets your requirements and takes advantage of the best offers in the market for your property and situation.
If you’re going to be looking for a cottage property this summer that will require mortgage financing, I recommend that you give me a call before hand so I can review your requirements and financial profile and suggest different cottage financing strategies to consider. This can greatly assist your shopping process by giving you a better perspective of how certain types of properties can be financed in certain areas of cottage country.
Securing Financing For Construction Site Development
“For Builders and Land Developers Seeking Construction Site Development Financing, The Exit Strategy Is All Important”
As we move out of March, 2010, I can slowly see several Ontario residential development projects coming back to life where there wasn’t much going on the last two years due to the economic slow down.
When you look at the province overall, there is a glut of projects that are trying to start or restart up their efforts, creating a potential for near term over supply in the market as its debatable how quickly buyer demand will return to more normal levels.
So when a builder or developer is seeking construction financing for site development, here are a couple of things to keep in mind.
First, construction financing on average is more difficult to secure overall for development projects as lenders are closely studying the local markets and the expected demand that drives the repayment of the construction development mortgage.
Typically, as sites are developed and sold, a portion of the sale proceeds are paid to the lender so that each site’s title can be provided to the new owners free and clear.
However, if the prospect of sales is viewed to be too low, the reselling period will take longer, resulting in slower repayment of the mortgage financing which leads to point number two.
In the current market dynamics, both private and institutional lenders are looking more closely at the history of lot sales for related developments as well as the pre-sales for the existing development project seeking financing, and the historical resume of the developer. If there are a large number of lots in the development and the builder or developer plans to build out within their own group of companies, there will likely be less interest in the deal by construction mortgage lenders unless there is strong enough near term evidence of market development efforts that can generate the sales required in the time the construction mortgage needs to be repaid.
When you’re getting into developments larger than 10 or 20 lots, if your selling strategy includes selling to other builders and focusing your own sale and build out process on a smaller percentage of the lots, you’ve just created a more viable exit strategy for prospective construction loan lenders which will attract more financing interest in your project.
There are other marketing strategies you could pursue. Just remember that the key to getting the capital you require is presenting a marketing plan that a lender believes will move the lots in the current market.
If you’re seek construction financing for site development, site acquisition, or building construction, I suggest you give me a call so I can quickly assess your situation and provide relevant options for your consideration.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
Private Mortgage Lenders Require Realistic Exit Strategies
“If You Want To Acquire A Private Mortgage For Real Estate Property, Make Sure You Can Offer The Lender a Viable Exit Strategy”
One of the current challenges for private mortgage lenders is their assessment of a viable exit strategy for any mortgage funds they extend.
Because the mortgage term is typically only one year, they need to have some degree of confidence that the property will have a near term resale market if in the event that the loan cannot be repaid on time.
And while private lenders are more than prepared to take back a property to cover off their outstanding mortgage advance, it still doesn’t do them any good if the property can’t be sold in some sort of reasonable time period. The alternative then is to hold on to the property until it will sell which can be highly profitable in certain cases due to property appreciation, but it also reduces the amount of capital they have available to provide new loans, which goes against the business objectives of most private lenders for most properties.
And in 2010, there are lots of private mortgages coming due where the borrower can’t get refinancing because the institutional lending market is so tight, and the resale market for related real estate still has not picked up to provide a near term liquidation option.
Therefore, one of the keys to being able to secure a private mortgage at the present time is providing the lender multiple potential exit strategies to consider besides the worst case scenario of taking the property back and liquidating it.
While most borrowers do not want to have to end up selling the property to pay back the private or turn title over to the lender in settlement of the debt, they also don’t provide a very convincing case as to how they plan to repay the lender in a years time.
The more planned out and feasible the exit strategy or strategies, the more likely you will get serious interest from private mortgage lenders in just about any geography and property type.
If you’re looking at private mortgage financing as an option for a residential or commercial property, I recommend that you give me a call so that we can first review the potential exit strategy and then find viable private mortgage options for you to consider.
Ontario Private Mortgage Lending Market
“Ontario Provides A Diverse And Deep Private Mortgage Lending Pool For Residential and Commercial Applications”
One of the definite advantages of living in Ontario, especially the southwestern part of the province, is the mortgage options afforded to businesses and individuals by private mortgage lenders.
While many consider private mortgages are hard money or lenders of last resort, they do serve a definite purpose that probably should be considered more often than it is.
For instance, institutional lenders will charge very similar rates for less optimal mortgage opportunities, but also provide a more rigorous, time consuming, and costly application process.
And while most private lenders will only supply one year interest terms, there are those that will go as high as 5 years and will even consider an amortized payment where the principal balance can be paid down versus paying interest only for the entire term.
At the same time, many individuals want the one year interest term and the interest only payments as they are trying to put bridge financing in place for a transaction or financing requirement that is short term in nature. Private mortgages can be ideal for these types of situations as the time line meets the needs of both parties.
Private lenders, on average, will consider higher risk situations than traditional mortgage lenders, but that has changed somewhat as well. There are still privates that will finance property because they are comfortable with taking possession or even ownership if the borrower does not meet all their commitments. But more and more, there is a growing group of private lenders who are more focused on situations where its less likely that they will have to take back the property and there is a solid plan to repay the mortgage at the end of any mortgage term that gets proposed.
The other great advantage of living in Ontario, especially the GTA, is that virtually every area has private lender representation for both residential and commercial mortgage requirements. There is also a broad cross section of targeted private lenders that will do large volumes of certain financing applications only. The benefit of the niche lender is that they can quickly assess any opportunity that meets their criteria and they are more inclined to consider higher risk scenarios due to their more in depth knowledge of the local market and target application.
If you are trying to locate and secure private mortgage financing for a residential or commercial application in Ontario, I suggest that you give me a call so I can quickly assess your situation and provide relevant options for your consideration.
Construction Loan Requirements
“Here Is A Fairly Comprehensive List of Construction Loan Requirements That May Be Required By A Construction Lender”
If you’re planning a construction project that requires construction financing, here is a broad based list of borrower requirements that you may have to provide with your application. The larger the project, the more likely more of these items will be relevant to you.
- Building Plans
- Floor Plans
- Property Elevations
- Artist Renderings of the finished project.
- Construction Budget
- Land Acquisition Cost
- Hard and Soft Costs
- Building Materials
- Contractor Fees
- Building Permits.
- Sewer and Water Hookup
- Lot Levies
- Architect fees
- Legal Fees
- Appraisal Fees
- Interest Costs and Mortgage Broker Fees
- Contingency Allowance
- GST
- Site Supervision
- Overhead
- Construction Contracts and terms
- Cash Flow Projections Outlined by Activity and Timing.
- Offer To Purchase
- Offer To Lease
- Projected Income Statement For The Project
- Phase I Environmental Report
- Project Feasibility Studies
- Absorption Analysis
- Recent Appraisal
- Purchase and Sale Agreement
- Borrower Information
- Personal Net Worth Statement
- 3 Years Historical Financial Statements
- Credit Report
- Related Construction Experience
Remember that this is far from an exhaustive list as other information can be requested, depending on the specific nature of the project. In many cases, approvals will be granted subject to certain additional information being provided, or previously provided information being resubmitted in a more acceptable fashion.
The application of these requirements will vary considerably from one project to the next, but at least you have a better idea of the things that can be asked for when applying.
Commercial projects will require more of these items that single family unit projects, but even home owner build situations can require significant amounts of information, especially when applying for institutional construction financing.
Right now, the lending market has tightened up due to the recent economic recession. As a result, more requirements are being asked for that in the past, so the more pre planning you can invest in your project, the better your chances will be of securing the type of construction financing you’re looking for.
To better understand what items would directly apply to your project, I suggest that you give me a call so I can provide you with a customized list of the mortgage lender requirements that are likely going to be the most relevant for your project.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
The Commercial Mortgage Sub Prime Market
Mid Market Commercial Mortgage Options Have Shrunk And Are Still Shrinking
Like the well publicized sub prime residential mortgage tailspin occurring in the U.S., the commercial mortgage sub prime market is also way down to non existent.
The sub prime market is a second tier institutional market that provides funding between traditional institutional lenders and private lenders.
The recent economic turn down has driven many North American sub prime lenders out of business either through failed portfolios, a lack of available funding, or a combination of both.
Sure, some of the bigger players have been provided with well documented bail outs, but even they aren’t issuing a whole lot of new loans these days.
The impact to business financing is considerable in that if you can’t qualify with an “A” lender, which is no easy feat these days either, you can drop right down into private money commercial options as there isn’t much between at the current time.
In many cases, commercial property purchases or refinancing scenarios are having to utilize private mortgage options for one or two years to provide a bridge financing to hopefully better days when the business performance will have increased and the mortgage markets have returned to a closer version of normal.
The biggest challenge business owners are having right now is in not recognizing this change in the market and as a result, they end up spending too much time looking for a type of money that doesn’t exist.
And because of the increased opportunity level for private lenders, its not automatic that a private loan can be secured either.
The commercial version of the sub prime market is likely going to be in disarray for some time to come as more banks in this category are expected to close in the coming months.
The key take aways from all of this are 1) allow more lead time to get commercial mortgage financing in place, and 2) don’t spend too much time looking for money that’s not there right now.
If you have a commercial property financing requirement that you’d like to discuss, please give me a call and we’ll go over the relevant options together.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Private Lenders Have Become More Selective
Many Private Mortgage Lenders Have Changed Their Approaches To Approving Loan Requests
Some are calling the current recession an extended Christmas season for private mortgage lenders.
With most institutional lenders either being very conservative with their new funding commitments, or not lending at all, the private mortgage lending space has gotten a large increase in higher quality applications over what they would typically see.
As a result, they too have become more selective focusing on the lower risk, higher return opportunities.
Private lenders are largely divided into two camps.
The first camp is demanding higher levels of due diligence and are more focused on deals that have a higher probability of being repaid at the end of the one or two year mortgage terms that are typically issued by lenders.
This group of privates will ask to see financial statements, credit bureaus, customer contracts, personal net worth statements, and much of the same type of application info requested by a bank.
Of course there is absolutely nothing wrong with this approach, but it does demonstrate that private mortgages are more likely to be issued to businesses and individuals who have a higher probability of servicing the debt and making timely repayment than those who have a history of poor credit management or have no strong prospects for repaying the debt when it comes due.
The other group of private mortgage lenders can be categorized more at the opposite end of the spectrum whereby they are less interested in the back story and the financial profile of the borrower and more interested in the long term value of the property offered as security.
In the current recession, there are are some highly depressed properties that will generate considerable returns when things turn around. For private lenders that are prepared to be patient, financing these types of properties in the near term can become highly profitable in the event of foreclosure.
Either way, private mortgage financing become harder to come by because there is more demand than supply.
If you need a private mortgage for a residential or commercial property, I suggest you give me a call so that I can quickly assess your situation and provide relevant mortgage financing options for your consideration.
The Construction Mortgage Funding Process
“Before You Accept a Commitment From a Lender To Provide Construction Financing, Make Sure You Know Exactly What Will Get Disbursed and When”
When you’re getting ready to accept an offer for construction financing from an institutional or private lender, make sure you read through the commitment document carefully with respect to what costs will be covered in the draw request and how the hold back will be managed.
Starting with the hold back, institutional lenders will retain the hold back portion and typically not advance it at the end of the lien period. So even though the total approval for construction financing includes the hold back portion, it will never be actually advanced unless their is a claim against the project. Therefore, do not count on receiving these funds at the end of the project.
Private lenders can be very mixed on advancing hold backs. Some privates will retain the hold back to protect their own interests, but still advance the hold back portion once the 45 day lien period has expired without any claims being made. Other private mortgage lenders will advance the hold back portion with each draw, placing the responsibility with the borrower to manage the hold back liability.
In terms of the construction costs, another sometimes tricky item to look for in the commitment is payment of GST. When you’re dealing with a general contractor, the lender will be paying them directly and may have a policy not to fund the GST portion. If you don’t know this at the time of signing up for the construction mortgage, you can be left scrambling for additional cash flow to pay the GST to the builder when the draws come due.
If the information is not listed out in the mortgage commitment, make sure to go over the draw process and exactly what costs may not be covered as well as how the hold back allowance will be managed.
Getting a funding surprise in the middle of a project can cause immediate cash flow problems that can lead to delays and of course additional costs.
This is another reason why it makes good sense to utilize the services of a construction mortgage broker so that these types of funding requirements or restrictions are clearly known up front and proactively dealt with so that there aren’t problems down the road.
Click Here To Speak With Joe Walsh, Your Construction Mortgage Broker.
Commercial Mortgages For Owner Occupied Real Estate Properties
“Even In The Midst of The Recession, There Are Still Excellent Commercial Financing Deals Available To Small Business Owners”
If you have a strong borrowing profile, there has perhaps never been a better time to finance commercial real estate. Bank mortgage deals can be found under five percent, providing a level of debt servicing that’s seldom been seen.
Stronger applications can command loan to value ratios as high as 75%, providing excellent leverage for any borrower looking to acquire a property or a business seeking to refinance an existing building.
And if you’re willing to compromise slightly on the interest rate, you can secure a commercial property mortgage that’s at or near 100% of the property value.
Commercial Term lenders that provide mortgages sometimes have a hard time competing with the Chartered Banks on interest rate, so they offset their rate disadvantage by offering higher leverage for owner occupied buildings.
The rationale from the lender’s point of view is that they are lending primarily on the strength of the business and because the building is owner occupied there isn’t a concern that a core tenant will not renew a lease or that there will be any vacancy rate cutting into the cash flows.
If the business is generating sufficient cash flows to debt service the asset, then the higher leverage on real estate provides greater access to capital at still very reasonable rates.
In some cases, term lenders have claimed to even go beyond 100%mortgage financing of the real estate under very strong borrowing conditions. While this is definitely not the norm, it does show that higher leverage, even at 80% to 95% on self occupied buildings is not only possible but very cash flow friendly.
So regardless if you’re looking for the lowest cost or the highest leverage, there are some great commercial mortgage options available to you and your business.
The key is maintaining a strong credit profile and continually producing cash flow statements year over year that support the debt servicing that would be required.
If you have a commercial property you’re considering buying or refinancing, please give me a call so I can quickly assess your situation and provide you with relevant options to consider.
Click Here To Speak With Joe Walsh, Commercial Mortgage Broker
Home Equity Loans For Small Business
A Home Equity Loan May Very Well Be The Best Option To Save Your Cash Flow and Keep Your Business Afloat
The recession has been hard on small and medium sized businesses. In many cases, the owners are now scrambling to try and secure additional capital for cash flow shortfalls, lender payouts, and even regular asset replacement.
If you’re business is under almost any type of stress, good luck finding a reasonably priced business loan in terms of interest rates. The “A” lenders are not lending, the “B” lenders don’t exist right now, so all that’s left are the pure asset based lenders in many cases. Not only do they lend on liquidation value of the assets, which by the way can be pretty low in the current economy, but the rates start in the mid teens and go up from there.
The obvious alternative in many cases is a home equity loan. Even with bad credit, a private second mortgage is likely going to cost less than any form of small business financing these days for businesses that are struggling.
The only real problem with this strategy is mindset. Too often, business owners and their spouses are reluctant to mortgage finance their homes any further into debt in fear of losing their home if things get really bad.
This is very understandable and a natural reaction to having to risk more than you’re comfortable with.
But here’s some things to think about.
If a small business has any debt outstanding right now, its likely partially secured by a personal guarantee. If all the home owners have signed the guarantee, then the home equity is already at risk.
Second, if the business is coming through a dry spell due to the recession and can see that things are starting to pick back up, a home equity loan would be less risky that any other form of asset based lending. For example, if the business could secure asset based financing for 24% on a $100,000 versus a home equity loan at 5% for the same amount, the business just saved $19,000 in expenses using a simple interest, no principal repayment calculation. Not only has the stress on the cash flow been reduced, but the business and business owner’s equity has not been diluted by these high rates.
If you’re a small business owner that requires additional capital in your business and has some amount of equity in your home, please give me a call and let me see if we can come up with a better financing solution than what you may be finding in the market place these days.
Construction Loans Can Be Hard To Come By
The Bar For Construction Financing and Other Forms Of Mortgage Financing Is Significantly Higher in 2010
As we move deeper into the recession, construction loans are becoming harder and harder to secure. Or put another way, lenders tend to be defaulting to letter of the law with respect to their application criteria and anyone that deviates from the requirements will have a hard time getting financed.
Gone are the days when close enough was good enough or when a certain amount of customization was almost expected by applicants.
And even though we are all hearing the positive news reports of how the economy is moving out of the recession, the capital markets are lagging behind and if anything are becoming more restrictive.
So how do you deal with this if you have a construction project that requires financing?
The simple answer is to make sure that your project is well planned out and that all the lender requirements are covered off to a higher level of completeness.
The devil right now is in the details, and for those that like to cut corners or live too close to the edge, there isn’t going to likely be much if any construction funds available to them by third party lenders or investors.
This is also where the benefits of a mortgage broker that specializes in construction get further magnified and why you may also want to stay away from less experienced brokers that occasionally dabble with a construction loan application.
There is less room for error in the application process these days, so its best to make sure you’re focused on the most relevant lenders and following their internal process to improve your chances of success.
The best way to accomplish this is through the assistance of an experienced construction mortgage broker who can leverage their lender relationships to stay on top of the constantly changing lender requirements.
Most projects do not have the luxury of extra time to find and secure construction financing, so in order to keep your planning time line on track in 2010, make sure that you over deliver on your application and the standard requirements, otherwise you could be searching for a construction mortgage for an extended period of time.
If you have a construction project that you’re planning or stuck locating financing for, I suggest that you give me a call so I can quickly assess your situation and provide relevant options for your consideration.