Recession Keeps The Squeeze On Ontario Construction Financing
“Lenders Continue To Take A Lower Risk Approach When Considering Ontario Construction Financing Opportunities”
Most of what we hear these days about the recession is that things are getting better. That may be the case for monthly production and consumer confidence, but it doesn’t necessarily apply to the still very fragile capital markets, especially when tools like mortgage insurance are not available to reduce risk.
For Ontario construction financing, which is mostly provided by private lenders, the general approach is one of greater conservatism and caution when it comes to considering all types of projects, especially if they’re located outside of the Greater Toronto Area.
As an example, in the not too distant past in some of the bigger centers outside of the GTA, private lenders as a group were not overly concerned with borrowers having a take out mortgage arranged prior to advancement of construction loan funds. But at the present time, even if you’re building in the middle of cottage country which tends to still have a pretty active resale market, a take out mortgage has become a requirement more often than not for private construction mortgage approvals.
The second challenge for home owners, builders, and developers is that even when construction financing can be secured, the loan to value in many areas is in the 60% to 65% range versus 75% to 80% as you get closer to Toronto.
And rates can be higher as well, making projects harder to cash flow as you get further away from the city center.
Things are not likely going to change any time soon either. So even though development projects are showing more signs of life than in the last two years across the province, the process for finding and securing construction financing has become more complex for anything that isn’t in a prime real estate market.
The adjustment that needs to be made by builders and developers is to start working on arranging their construction financing further in advance to make sure they are going to have funding in place for their projected start times. And if turns out what’s available in a given area is higher cost and lower leverage than what was expected, the project may have to either be adjusted in terms of size, or delayed all together until more suitable financing becomes available, which in some areas could be quite awhile.
If you have a construction project that requires capital, give me a call so I can quickly assess your requirements and provide you with relevant options for your consideration.
Click 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