Construction Bridge Loan Financing
“Here Are The Most Common Situations Where We Provide Construction Bridge Loans And Mortgage Financing To Our Clients”
Every once in awhile we need to provide a construction bridge loan to a builder, developer, or property owner that is mid way through a construction project and requires additional funds to complete the work.
All of the construction bridge loans we place are through private mortgage lenders due primarily to the speed in which they can react to a bridge financing request.
In these situations, the money is required right away so that the project doesn’t stall out and other costs start being incurred. So being able to get something in place quickly is paramount to the the owner of the construction project.
One of the reasons that construction bridge financing can be placed rather quickly in most situations is due to these requests typically come near the end of the project when most of the building or construction risk has been removed from the lending equation. Also, the amounts required tend to be considerably smaller than the increased value of the property from building, providing ample securing to a construction lender, even if they need to be in second or even third position behind the primary sources of financing for the property and project.
The most common scenarios where a construction bridge loan is required is as follows:
Budget Over run: This is probably the one we see the most often where certain stages of the construction project have cost overruns due to inaccurate budgeting or unforeseen and unplanned events that created more costs for the project. The result is that the project ends up costing more than expected and requires additional funds to complete.
Change In Scope: While similar to the first scenario, a change in scope in not about the budget for the project being overrun by higher costs. This is a result of the builder, developer, or property owner making a conscious decision during the project to make a change to some aspect of the build which results in more costs for the project. This can be things like a bigger kitchen, finished basement, more landscaping, and so on.
Primary Construction Loan Shortfall: This is the least common of the three, but it does happen more often than one might think. Under this scenario, the primary construction lender that is in place is not providing draw advances when the builder or developer expects them to be made. And in some cases, the draws can also be cut back by the lender if in their view there is more of the project remaining to be completed than what the builder or developer is declaring. In any case, there is not enough money being advanced when required and the result is a need for incremental capital to offset the short fall.
While there are lots of private mortgage lenders in the market place, only a small handful will do these types of construction mortgages and do them quickly enough to meet the needs of the construction project.
The best way to get access to construction bridge loan financing is to work through a construction mortgage broker who has direct relationships with these types of lenders and has a track record for placing construction bridge mortgages.
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