Don’t Leave The Process Of Arranging Construction Take Out Mortgages Too Long
“Just Because You Can Start a Construction Project Without a Take Out Mortgage in Place, Don’t Leave It Too Long”
While institutional lenders will require you to also qualify for a long term mortgage or take out loan with them before they will grant you a construction loan, the same is not typically the case with a private lender.
And because the vast majority of Ontario construction loans are granted annually by private mortgage lenders, the requirement to have a take out mortgage in place prior to draw advances on building loans for both residential and commercial projects are not always necessary.
At the same time, there are many private lenders that are closely aligned with long term institutional mortgage lenders in order to try and secure both the construction and take out mortgages. While the take out mortgage may not be a requirement at time of construction, you may still be obligated to accept one of their term out options to payout the construction financing loan.
For more independent private mortgage construction financing sources, they will only typically require a take out mortgage be in place prior to loan advance if they view the subject real estate to have a weak resale market and/or feel the location where the project is situated will not attract a lot of interest from term out lenders.
When a take out mortgage is not arranged from the outset of the project, there is also the risk that the process for trying to locate a construction take out loan during the project will end up being a distraction to the owner’s project management efforts, creating potential incremental cost and cash flow management problems in the process.
The other issue with applying later on for construction take out financing is that an approval may not be forth coming when expected, causing the payout process for the construction loan to be delayed, which will require the borrower to pay the higher cost of private lender construction financing for a longer period of time and potentially run the risk of the private lender taking foreclosure action to get the loan repaid.
When put under pressure to get a take out mortgage in place at the end of the project, the borrower may end up being forced to take a less than optimal long term mortgage alternative than could have been secured if more time was available.
If you’re in the process of planning out a construction project, or deep in the middle of one where a construction take out mortgage is required, I suggest that you give me a call so I can quickly assess your requirements and provide relevant long term take out mortgage options for your consideration.
Clock Here To Speak With Construction Mortgage Broker Joe Walsh
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