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.
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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