Ontario Construction Mortgage Lenders
“Selecting The Right Construction Lender For Your Project”
There are a large number of construction mortgage lenders in the province that provide construction financing resources to builders, property buyers, and property owners.
Each mortgage lender will tend to have a unique construction finance focus whether it be residential homes under $500,000 in value, commercial buildings under $1,000,000, mutli unit complexes, and so on.
The market for Ontario construction mortgage lenders is further split up into institutional lenders (banks, credit unions, trust companies) and private lenders. Institutional lenders are typically lower leverage and lower costs. To utilize an institutional source of construction finance, the borrower will typically have high amounts of equity in the project. When higher leverage is required, the private market has a number of lenders with their own financing models that can be utilized.
Availability and diversity of construction lenders is directly related to population concentration whereby the Greater Toronto Area (GTA) has significantly more construction lenders than the outlying areas.
Part of the reason for this is due to the fact that private lenders tend to work on more of a regional basis, maintaining coverage of relatively small geographic areas. The rationale for this approach by privates is because many of them want to personally visit the properties and be close enough to inspect the construction progress themselves.
And regardless where you are located in Ontario, private lender tends to be more regional than provincial in nature, so the more remote your location, the less private lending sources that will be available.
Two of the key areas a construction lenders will evaluate prior to providing a mortgage commitment is 1) does the construction project have a take out financing strategy to pay out the construction loan at the end of the project, and 2) what is the resale market for the completed construction project.
In regards to the first question, a long term take out mortgage doesn’t necessarily need to be arranged prior to starting construction, but from the construction lenders point of view, there has to be strong evidence in the market that options for a take out mortgage are available for the specific project and location.
With respect to the second question, the potential resale value of the construction project helps establish the real underlying value of the real estate security to the construction mortgage lender. If there is a very thin or even non existent real estate market for the project, it will be much more difficult to secure construction financing, and any construction loan that is provided will come with more aggressive and restrictive terms including higher rates and tighter advance requirements.
While there are many lenders available, there can be large differences in that way they manage their businesses and the patience levels they may have with project delays or any construction related issue that could arise which impacts the lending facility.
Therefore, its very important to work with an Ontario construction mortgage lender that’s not only interested in providing funding, but also one that has a solid reputation for working effectively with borrowers to get projects completed.
The best way to assure that 1) your focused on the right construction financing program for you construction project, and 2) working with a construction lender that’s going to be prepared to work with you should anything unforeseen occur is to utilize the services of a mortgage broker that specializes in construction mortgage financing projects.
Your best first step is to give me a call so that I can quickly assess your situation and provide you realistic options to consider. From there, I will help you determine what course of action makes the most sense and manage the administration process to get everything in place.
Click Here To Speak Directly With Joe Walsh, Construction Mortgage Specialist.
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