Residential Condo Development Financing
“Challenges To Residential Condominium Development Loan And Mortgage Financing”
When we’re looking at requests for residential condominium development financing in Toronto and other parts of SW Ontario, one of the challenges that we many times have to try and work through is a lack of presales.
While there is certainly variability from one lender to another regarding their presales requirement, in most cases it falls into a range of 70% to 75%.
In many cases, when a developer inquires about condo development financing, they are well along with the project, own the land, and have completed a certain portion of the work, but now require additional capital and may have significantly less pre-sales than a lender is looking for.
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In these situations, instead of providing a development loan, we will look to provide a bridge loan against the value of the property so that money can be obtained to carry on work and time can be bought for more pre-sales to take place and eventually get into the 70% to 75% range.
This can be a very realistic strategy in that the work completed to this point has likely added value to the property, potentially considerable value.
The bridge loan may also need to be in a second mortgage position behind an existing first mortgage which is also something that can be accomplished through some of our bridge lenders.
Provided that there is enough equity in the property to support additional borrowing, the bridge lender is going to be interested in the deal, especially if they see a clear path to the project getting their pre-sales up to a high enough level to allow for a larger condominium development loan to be approved.
When the condo development loan gets into place, the bridge loan will get paid out and the project can continue.
While there are many different challenges that can face a residential condo construction project, the challenge of not enough pre-sales is one of the most common and using a bridge loan as an interim step to getting you to a larger development mortgage is great method for getting around this issue.
If you have a residential condo project you are currently planning, or one you’re in the middle of where funding is required, I suggest that you give me a call so we can go through your situation and discuss the most relevant financing options that are available to you.
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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