Bridge Financing For Construction
“Bridge Financing For A Construction Project Is Typically Required In These Three Situations”
When we are talking about bridge financing for construction, we aren’t referring to funding to construction an actual bridge over land or water.
No, instead we’re referring to additional capital for an existing construction project to fund its completion.
This is typically provided by a private mortgage lender that specifically funds these types of requests and is secured by a mortgage registration behind the outstanding mortgages and liens already registered against the property.
To better understand when you would require a construction bridge loan, here are the most common scenarios where bridge financing is sought.
The most common situation is where there are cost overruns in a construction project. Certain items cost more than budgeted to complete, unexpected expenses occur that were not planned on but must be dealt with to complete the project, and on.
In many cases, the construction project is over 90% complete and needs a relatively small amount of money, compared to the total project cost, to complete the remaining work. And its also not unusual that these funds are required quickly in order to avoid any construction delays that could add still more costs to the project.
The second scenario where bridge financing is required for a construction project is when there is a change in scope by the builder, developer, or property owner. This is slightly different than a cost overrun as that is basically out of the control of the developer or contractor. A change in scope is a conscious decision by those in charge to change certain features of the build which will be higher in cost that what was initial budgeted. This could include such things as different windows, a larger kitchen, finished basement, etc.
Because the incremental cost related to a change in scope can be isolated, the bridge financing to complete the work can be arranged for the time that particular work is going to take place.
The third most common situation where bridge financing is required in a construction project is when the primary construction lender is either not providing one or more construction draws on a timely basis, or the lender has cut back on the scheduled draw amount causing a shortfall in the cash flow for the overall project.
While private mortgage lenders are the key suppliers for these construction bridge loans, there are typically only a handful of private lenders that will provide this type of financing.
As a result, its important to be working with a construction mortgage broker who is aligned with construction bridge financing sources in order to gain access to the funds required as quickly as possible.
If you have a construction project that can’t be completed without some additional capital being injected into the cash flow right away, I suggest that you give me a call so I can quickly as your requirements and provide construction bridge financing options for your immediate consideration.
Ontario Construction LoansConstruction Financing Shortfall
“Where Can I Get Additional Construction Financing To Complete My Project?”
As we head into the main construction season, this is going to be a very common call I get from people who do not have enough funds available to complete the project they are currently in the middle of.
There could be a number of reasons for not having the money to complete the work.
- Changes in Scope (like a decision to make the kitchen bigger) over ran the budget.
- Some unexpected expenses were incurred from unforeseen events (like excessive rain delayed the closing in of the structure)
- The bank refuses to advance any more draws against the construction loan already in place (like the third party estimator claims that remaining work costs more than the funds available even if you don’t agree or can prove otherwise)
We could probably add considerably to the list, but it doesn’t really matter.
Your short and you need more money.
Usually when a project gets to this point, there is no time to waste as their are contracts to honor and sub trades to keep engaged to complete the work.
The good news is that there is typically a way to solve the problem through what we call a construction bridge loan.
Your ability to acquire a construction financing bridge loan is going to be relative to the amount of work completed and the amount in value the property has increased.
For instance, if 80% or more of the work is completed, you can typically get 75% to 80% of the completed fair value of the property.
If completion is lower, the amount of money than can be arranged as a percentage of the property value will be less.
The source for construction bridge loans are basically private mortgage lenders that advance construction loans and have the ability and experience to quickly assess the work completed in order to make a lending decision, hopefully in your favor.
And because this is coming from private lending sources that are used to this type of request, the turnaround time can be as quick as two to five business days.
Of course you understand that fast, short term funding is going to come at a higher cost that a bank loan or mortgage, it still likely going to be cheaper than the costs you’re trying to avoid if your project stalls out.
The construction bridge mortgage would be registered behind the mortgages in place and would be paid out either from the proceeds from resale of the finished project, or through funds provided by the take out mortgage if the property owner is planning to self occupy.
If you’re in the middle of a residential or commercial construction project that requires additional capital in a hurry to get finished, I suggest that you give me a call so we can quickly assess your situation and provide relevant construction bridge financing options for your consideration.
Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh
Ontario Construction LoansIngersoll Construction Loan
”Here’s Where You Can Secure An Ingersoll Construction Loan for Either a Residential Or Commercial Construction Project”
We provide Ingersoll construction loans for our clients from both institutional and private mortgage financing sources in southern Ontario.
The most common form of construction financing is for single family home construction with requests for financing coming from builders, property owners, and developers as well as individuals looking to do a self build project. The most common form of construction financing for this type of application is a private mortgage construction mortgage. Even though this form of construction lending is more expensive than what you could secure from the bank, it maintains it popularity in the market due to 1) a faster application process; 2) more streamlined draw administration; and 3) the ability to arrange the long term take out mortgage after construction has started, providing more time to find the best deal in the market.
If you have the proper profile and the lead time required to get institutional construction financing in place, we can get you matched up with a mortgage lending program that is able to meet your requirements. Keep in mind that for single family self builds the institutional lender will require you to qualify up front for both the construction loan and the take out mortgage as they won’t provide the construction financing without getting the long term mortgage as well.
For commercial construction projects, there are also both institutional and private mortgage construction financing options to consider. With commercial construction, institutional lenders will provide construction financing on a one off basis for larger projects such as condo developments. Similar to smaller residential projects, more lead time is required to secure commercial construction loans due to the lower level of risk that is associated with them and the higher degree of due diligence required by the lender to verify the risk level.
Most private mortgage commercial construction loans are for amounts under $2.0 M, although private lenders do provide higher amounts of construction funding for commercial projects whether it be on an individual, partnership, and syndicated financing scenario.
If you require an Ingersoll construction loan for a project your planning or currently in the middle of, I suggest you give me a call so I can quickly assess you situation and provide relevant construction loan options for your immediate consideration.
Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh
Ontario Construction LoansBrantford Construction Loan
“We Can Help You Locate and Secure a Brantford Construction Loan For Your Project”
We can provide Brantford construction loan options for any number of different types of construction projects and phases within a given construction project.
Our clients range from home owners doing their own self build projects to large scale residential and commercial developers and builders seeking funds for all or part of their development.
We focus on Brantford and the southern Ontario area in order to be able to stay on top of all the different types of construction financing that can come into play for any given scenario.
This includes both bank and private mortgage funding as both can play a role within the same project many times.
For instance, self build projects are mostly funded with a private mortgage construction loan followed by an institutional or bank take out mortgage.
In some situations where the lead construction lender is a bank, we may still be asked to provide a bridge loan at some point in the project where the institutional construction loan cannot cover certain costs for any number of reasons.
Conventional construction loans from banks each come with their own requirements and project targets that need to be matched up closely with a given project so you can get the most benefit out of them. In some cases, the lowest cost lender interested in a project may not be the best fit given the requirements of the owner or builder.
The same is true of private mortgage construction lenders in that they too will have their own preferred project type, rates and terms, and administration process. So getting the right borrower to lender fit is important regardless of what the source of construction financing is in order to achieve the best cash flow during all construction phases.
This is why its important to work with a construction mortgage broker who not only works with both bank and private mortgage construction lenders, but has the experience in working through construction financing administration problems as well as the transitions from one type of construction financing to another in the middle of a project.
If you require a Brantford construction loan, please give me a call so I can quickly assess your requirements and provide construction mortgage financing options for your consideration.
Click Here To Speak With Brantford Construction Mortgage Broker Joe Walsh
Ontario Construction LoansRetirement Home Construction Loan
“Keys To Retirement Home Construction Loan Financing”
Even though retirement home construction loan financing is quite common these days, especially with the growing demand for this type of housing, construction financing can be difficult to arrange.
While higher ratio institutionally insured mortgages backed by CMHC are possible to obtain, many projects struggle to qualify for the level of funding that’s required.
The main reason for this is the challenges the project faces with satisfying the repayment assessment and post construction valuation of the construction mortgage lender and/or the mortgage insurance provider.
Retirement homes are valued for financing based on the estimated market value at the point of completion. Because the market valuation is dependent on the revenue producing ability of these types of assets, it becomes more difficult to establish value with no historical financial performance available.
In many situations, a newly constructed retirement home will not fill up the available occupancy for one or two or more years, potentially providing a cash flow shortage for debt servicing a large mortgage that was used to build the facility in the first place.
The key to getting the largest potential retirement home construction loan is by having a large percentage of units presold or committed (depending on the business model) at the beginning of construction so that the revenue projections can reflect stronger year one cash flows that are supported by solid commitments to occupy or own.
This is not an easy task to accomplish but one that is becoming more and more of an issue with retirement home construction projects. Unless you have an alternative source of revenue that you can pledge towards the debt servicing of the project, it may be difficult to qualify for the retirement home construction financing required unless the unit or occupany marketing is mostly completed prior to the project commencing.
There are private mortgage construction financing options for these projects as well, but they are going to also rely on the repayment strategy of the construction loan and will be more focused on the geography of the project, favoring those projects in more densely populated areas.
If you require a retirement home construction loan I suggest that you give me a call so I can quickly assess your requirements and provide relevant construction financing options for your consideration.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
Ontario Construction Loans
