Criteria For Condominium Inventory Mortgage Financing

contact-joe-button4The main reason for trying to secure a condominium inventory mortgage is to generate additional capital for a condo project that is not completed to the point where condo sales can be closed and the related funds from sale injected into the project’s overall cash flow.

This mortgage is secured by paying out the construction loan and putting in place a new mortgage that will function as a line of credit, leaving it open for repayment at any time.

While the refinancing can also generate a substantial saving in interest costs, the savings created on the interest side will likely be offset by the costs associated with setting up the condominium inventory mortgage.

The true value doing inventory financing is securing additional capital to fund the project through its later days.  Additional funds are secured based on the appraised level of completion.

To qualify for condo inventory financing, the property owner must be able to demonstrate that the trades and suppliers to the project have been paid up to date, or mostly up to date.  If incremental funds were not capable of at least paying off outstanding suppliers, its unlikely that the commercial mortgage would be approved.

Another major consideration by a lender for this type of bridge mortgage financing is the amount of condo unit pre-sales that have taken place.  Because this is effectively a short term bridge loan, the lender will want to see that significant progress has been made on sales which will further verify the market value of the project and strengthen the security position of the lender.

Even if a project is 100% completed with respect to construction, there may still be a need to cover off the financing costs being carried by the project until the condo registration is complete and the development has the right to close sales on pre sold units to generate cash flow.

Basically, the closer the project is to completion and the higher the level of pre-sales, the more likely it will be to secure financing and also to secure maximum levels of leverage.

If you have a development project that requires additional capital,  I suggest you give me a call so that we can quickly go over your options together and determine the best course of action for your project.

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About the Author Joe Walsh

I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel

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