Construction financing for land servicing requirements for a new subdivision or other project where the capital required will be used to install services such as water, power, communications, and sewer, are available from both our institutional and private mortgage lending base.

The most common request for land servicing financing is for services that are to be installed on the actual site where future building is expected.

That being said, there can also be construction financing requests to provide the necessary funding to bring services to the lot line, and to finance development bonds or letters of credit as well.

Most construction lenders are only interested in funding work that will incrementally increase the value of the property, so where there are off site financing requirements, there will need to be considerable equity in the property to support a non value added investment.

Because a construction development loan for land servicing is not typically an immediate income producing activity, its not uncommon that one of the developer’s funding requirements is that the loan include prepaid interest to service the debt until such time as there is a cash flow to make the required monthly debt servicing payments, or to retire the loan in full.

If there is no way for the developer to cash flow debt service during all or a portion of the loan period, then the financing facility is more of an equity based land mortgage, which may fall more towards quasi institutional and private mortgage lending solutions.

Bank and institutional lenders can still potentially provide equity based land servicing loans, but there will need to be a low loan to value requirement and very strong personal guarantees offered from the borrower or borrowers.

Outside of debt servicing, the two biggest considerations by the lender are market value and exit strategy.

With respect to market value, the lender is going to be interested in an appraiser’s opinion of value before and after the work is completed to the property as well as the geography in which the development is being completed.

In terms of exit strategy, there can be a number of different scenarios for repayment. Each potential scenario will have to be well documented and involve payment sources that are highly credible and verifiable.

If you’re in need of construction financing for land servicing, I suggest that you give me a call so we can discuss your project requirements together as well as go over potential construction financing options available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Construction Financing Requirements For Land Servicing

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Subdivision development financing is basically equity based mortgage financing up until the point where lot inventory starts being sold off on a semi regular basis.

Before that occurs, there tends to be no available cash flow to service any debt registered against the property, requiring debt service to either be built in at the start of a loan in the form of prepaid interest, or having the borrower retain a portion of the loan proceeds advanced to make scheduled loan payments.

Subdivision development financing can occur in a number of different stages, depending on the length of time it takes to obtain a final approved plan of subdivision, and on the increases in market value that occur at different stages of the pre planning process.

A common scenario would see the developer(s) acquire the land for cash or up to 50% of the purchase price to complete the initial round of financing.

Then, as time goes by and a draft plan approval, or its equivalent is obtained, the land is goes up in value. This is crystallized for lending purposed through a commercial appraisal from an AACI appraiser. The new value is then used to refinance the initial mortgage in order to provide incremental funds for the development process.

Once the project gets to plan approval, the market value will likely increase again, allowing for all or part of the equity required to secure a larger loan for land servicing and potentially building construction if a developer is retaining all the property for build out.

At this stage, the exit strategy for loan repayment from future sales is also going to be important as up to this point, the loan repayment strategy had basically been through refinancing over time.

Regardless of how many refinancing events take place, the subdivision development financing options available are going to be equity based, likely from private mortgage lenders, or quasi institutional lenders, who have a good working knowledge of the development process, and are prepared to step in an either complete the development or sell it off if the borrower is unable to either complete the project themselves, or does not meet the financial obligations of the construction loan financing facility.

If you require subdivision development financing for a project you’re planning or are in the middle of, I suggest that you give me a call so we can go through your financing requirements together and review relevant construction site development loan options.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Subdivision Development Financing Options

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We arrange land servicing loans to our customers in Toronto, the Greater Toronto Area, and Southern Ontario.

Land or lot servicing financing is typically available to developments once they have gotten to plan approval stage with the local planning authority.

There are a number of keys to locating and securing a site development loan.

One of the first criteria of a lender providing land servicing loans is the track record and reputation of the developer in terms of their professional resume and list of successful projects completed. A lack of historical success can greatly reduce the amount of leverage that can be available for any given project.

Directly connected to the first criteria is the financial track record of the developer as well. Its not uncommon that lenders will not consider an application from a developer who has had one or more bankruptcies in the past from failed projects. The distinction here is there is a big difference between a project that was not all that successful and one where those providing financing lost money.

Next on many lenders’ criteria list is the number of presales that have been completed to the point of application and projected to be completed at the point that funds are required. The presales form the foundation of the exit strategy for land servicing loan repayment so the amount and strength of the agreements is going to be important for financing.

Lenders are also going to be interested in who the project engineers are and level of work that has been completed to the point of application. Just like other third party service providers such as appraisers, lawyers, and accountants, lenders can also have a list of approved project engineers that are comfortable with as well as a list of project engineers they won’t work with.

The last, but hardly least area of initial focus by a lender providing land servicing mortgages is the location of the development and the projected absorption rate of the lots that come available from the development work to be performed. The lender is going to be interested in the amount of inventory that exists in that local market, historical proof of annual absorption, and the amount of market share the development is expecting to have versus other developments in the area.

Proactively putting all this information together with a construction mortgage broker can go a long ways to not only locating the financing you’re looking for, but getting the funding in place by the time its required.

Click Here To Speak With Ontario Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Land Servicing Loan Options

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Construction mortgage refinancing involves the repayment of the primary construction financing with another mortgage facility at or near the end of the construction project.

This is primarily required in the following three scenarios.

Build to Own. The property owner, builder, or developer is intending to retained the property after construction is completed and either self occupy it or rent/lease out the space to a third party.

Under this scenario, the construction mortgage would be refinanced by a long term take out mortgage, likely from a bank or institutional lender. The refinancing action would take place once the project has been completed an an occupancy permit granted to the property owner.

More Construction Funds Required. There are times when either more construction funds above and beyond the amount approved for the project are required and the initial construction lender is not prepared to provide further funding. In this situation, there is either a second construction mortgage registered behind the first mortgage, or the first mortgage is refinanced with a new mortgage set at a larger amount.

Another situation that happens where more construction financing is required is when the builder or property owner has not been able to get the primary construction lender to advance draws on time and/or for the full amount required to meet the obligations of the project.  In these cases, the construction mortgage in place is refinanced with a new construction lender.

Delay In Exit Especially in the case of condominium developments, there can be considerable delays between the time the construction project is finished and funds are available to the project from the sale of condo units.

When the project is completed, bridge financing can typically be arranged at cheaper rates than the construction mortgage rate due to the lower risk associated with a finished product.  A construction bridge loan can both lower the cost of capital for the project until exit funds become available and provide incremental capital to cover off the administration and operating costs of the project as well.

Depending on the specific project and the specific construction mortgage refinancing requirement, there can be both bank and private mortgage refinancing options to consider.

The best way to determine the right approach for a particular construction mortgage refinance request is to work with an experienced mortgage broker who has access to a broad array of construction financing sources.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh For Your Construction Mortgage Refinancing Requirements

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Land development refinance can be a very common occurrence due to the amount of time that can be required to move a land development project along through the regulatory process.

Typically a target property is acquired for cash and/or credit and as work is completed to cover off the regulatory requirements necessary to develop the land into a different use, further financing may be required.

As a land development project meets different regulatory milestones and approvals, the property tends to go up in value, which forms the basis for incremental lending to be made.

This can come in the form of an additional property mortgage registered against the property or a land development refinance of the existing mortgage or mortgages already in place.

Each lender that will consider a land development refinance loan will have their own criteria with respect to the breakdown of the equity in the project in terms of the origin of the equity.

Land equity can either come from cash invested in the acquisition and development of the property and/or property appreciation.

For some lenders, its going to be important that a certain percentage of the equity was created from cash investment, especially for lower risk lenders, as equity lending on purely appreciated value determined by an appraiser is viewed to be less certain than something at least partially based on a transaction where cash changes hands.

But in most land development refinancing scenarios where incremental capital is required, there is an element of property appreciation from a combination of work completed and overall market value appreciation for the type of real estate in question.

One of the keys to land development refinancing is the stage the project is at when a new loan is being sought.

The further the project is towards an approved plan or at least an approved draft plan, the more interest there is likely going to be from available lenders.

Another major consideration is the existing market value of similar land in the area an the expected timeline for resale of similar property. This is an important lender consideration with respect to the value of the security as they want to gain insight as to hard it may be to get their funds out of a property in the event of default.

A third consideration is the land developer’s exit strategy to repay the new loan and the probability of the exit plan to come into fruition within the timelines outlined.

In order to locate and secure land development refinance loans for a given project, the best approach would be to work with an experienced construction mortgage broker in target area.

If you require land development refinancing in Toronto or Southwestern Ontario, I suggest that you give me a call so we can go through your requirements together and discuss land development refinance options available to you.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh

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For smaller stand alone projects such as a single family dwelling or a commercial building, a construction financing source can quickly assess the existing market for similar projects and decide whether or not they want to proceed with a construction loan request quite readily.

In these situations, the lender needs to be comfortable with the builder or developer’s ability and rights to complete the project as well as the marketability of the end product.

And the larger the existing market is for similar or related structures, the easier it will be to secure construction financing.

But when the project size becomes larger, more complex, and is completed over a longer period of time, the builder, property owner, or developer needs to start the project with a good idea of what it needs to look like to acquire proper financing or risk either not being able to find a construction loan when required, or having to give away too much of the project’s projected profits.

An example of this would be a large residential development that is going to be completed over a number of years in small to medium sized market.

Judging the market’s ability to absorb the inventory over a number of years where economic cycles are going to be hard to predict can be quite difficult from a lender’s point of view.

So the exit strategy to repay the loan has to be stronger on average than mere market studies from high priced third party consultants.

And the more risk that is associated with a project, the more sales in advance the builder, property owner, or developer is going to need to come up with and the terms of these commitments are going to have to mean something to a construction financing source as well in terms of how binding they really are.

For larger projects, its going to be important to understand a head of time what the regional construction financing sources are prepared to consider in terms of project size, timelines, and exit strategy.

After some basic research, you may find that the proposed project is either too long or will take too long to complete or have some other detrimental aspect that will lower your probability of being able to acquire and utilize an appropriate source of financing.

Working backwards from the construction financing market, you may decide to change the scope of the project, bring on more partners, sell off certain phases to other developers, and so on.

This tends to be a much better approach as compared to going through years of work moving the project plan along only to discover at the point where money is required that either none is available for the project as presented, or those interested want too much of both the control and the take.

If you have a project you are working on or are in the middle of, I suggest that you give me a call so that we can discuss your construction financing requirements as well as the different options and lender requirements you should be considering.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh

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A construction site development loan can have very different requirements from one project to another.

For some projects a site development loan is the first step of multi phase financing that will be required to complete the project.

Each phase typically will require a distinctly different loan with specific draw requirements and an assessment of fair market value at each step of project completion.

For other projects, the property owner or developer is only performing site development work and will sell off landscaped and serviced lots to other builders and developers.

In the latter case, the actual site development for a large project can have multiple phases and can run for a number of years.

When this is the case, its going to be important to clearly identify the period of time funds are going to be required and exactly how the cash flow from the sale of units is going to be handled with the lender.

For instance, during the site development of a given phase or stage of the project, will the borrower or property owner be able to service debt on a monthly basis or will cost of capital need to be capitalized into the lot?

When site developed lots are sold, what is the borrower’s expectation as to how much of the proceeds will need to be applied to the outstanding balance versus retained by the borrower?

And when multiple site development phases are involved, does the borrower have a well laid out and defined cash flow that shows the flow of money coming in and out to the lender during the construction period?

Each site development project, especially for larger projects with multiple phases, will require a customized site development loan facility that meets the unique requirements of the project.

Therefore, its going to be key to make sure that the borrower / lender match is appropriate so that the project can advance as expected without having any cash flow issues during any of the work to be performed.

This is where the expertise of an experienced construction mortgage broker comes in to not only get the borrower focused in on the most relevant sources of site development financing quickly, but to also help make sure that the terms and conditions of funding are going to meet the requirements of the project and project owner(s).

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Site Development Loan Financing Options

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A first time home builder loan is both an exciting and potentially frightening undertaking, especially if its the individuals first home overall and first experience with mortgage financing.

Even for someone who has done through the process years earlier, its going to be hard to retain the information learned and used only once in the past.

And not only is the property owner going to require a home builder loan, but they are also going to need to arrange a take out mortgage as well.

Even though both a construction loan and a long term take out mortgage can be arranged through the same lender, its not always the best option to do so for a number of different reasons which can vary from situation to situation.

This is why its a good idea to hook up with an experienced construction mortgage broker who can perform an initial assessment of your situation and your project’s objectives and then discuss different financing options and approaches that are going to best serve your needs.

One of the key benefits of working with a construction mortgage broker to secure a first time home builder loan is that he or she is going to be with you all the way through the loan procurement process, the draw administration and draw advance process, and the construction refinancing into a long term permanent loan.

If and when any issues come up along the way which is not uncommon for construction related financing, you have experience readily available to you to help get issues resolved quickly and keep the project back on track.

And if for whatever reason the project goes over budget, an up to date construction mortgage broker will be in a better position to either get your construction financing increased or arrange for a bridge loan than if you had to try and figure that out in the middle of your project.

First time home builder loans can be secured through banks, other institutional lenders, and private mortgage lenders as well. Each program and lender type have their benefits which should be properly considered before making any type of financing decision.

If you are looking for a first time home builder loan, I suggest that you give me a call so I can quickly assess your situation and provide home builder loan financing options that meet your requirements.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your First Time Home Builder Loan Options

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Mississauga construction mortgage broker services are available through our office.

We provide Mississauga construction loans on a wide variety of commercial and residential projects and have funding sources both from the institutional and private sectors.

Having a large cross section of lenders is important when serving our clients in that many construction projects will require two or more types of construction related loans during the life of the project and its not uncommon for each loan to come from a different lender.

For instance, a project done in phases can initially require land acquisition financing, then funds for site development, followed by the actual construction loan for building, and then a take out mortgage is the builder or property owner plans on retaining the real estate upon completion.

Each of these phases of construction financing will have different requirements that can vary from project to project which can impact how the project will also qualify with different sources of financing.

When providing Mississauga construction mortgage broker services, our goal is to make sure that there is a comprehensive construction financing plan in place that will seamlessly meet all the requirements of the project from phase to phase.

The key is to always make sure there is a good lender to borrower match and that all types of financing required and arranged can work together to achieve the goals of the overall project.

We do not have a bias towards any particular type of construction financing and work with you to understand the needs of the project and then suggest the most relevant sources of construction mortgage financing that are available in the market place at the point in time capital is required.

This is important in that money lenders can be a moving target in terms of projects they are interested in or have the capacity to fund, so part of the process of identifying relevant lenders is knowing who is going to be prepared to supply capital to your particular project when the funds are required.

When unforeseen events occur that can cause a construction budget to go sideways, we also have the ability to arrange construction bridge loans to fill any gap between cash requirements and funding previously arranged, provided that the equity in the project can support the incremental funding.

If you require Mississauga construction mortgage broker services, I suggest that you give me a call so I can quickly assess your requirements and provide construction loan financing options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Construction Mortgage Financing Options

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Here are some tips for financing a construction project.

First of all, its going to be important that you have all your paper work in order before applying for any type of construction financing.

Most specifically, you’re going to need completed drawings and a detailed budget and cash flow to show how much the project will cost and how long it will take to complete.

Things such as your building permit and any other regulatory requirements should be covered off as well prior to applying, or in the process of being completed.

A set of blue prints as well as a drawing or artist rendering can also be helping as it lets people get a strong sense of what the finished project is going to look like.

Second, you’re going to either need a qualified builder or a resume that shows that you have the experience and expertise to either perform your own build, or manage your project as a general contractor. Construction mortgage lenders are going to want to qualify the builder or developer requirements as this is a key area of risk management to them.

Third, you’re going to have to have your personal finances in order. Construction projects typically require the builder, developer, or property owner to have an equity investment in the project prior to any lender advances of at least 20% to 25% of the completed project value. This investment can be in the form of real estate or capital invested into the site development stage and early build stage.

Most construction loans will not provide the first draw advance until the the project is closed in, so you’re going to need your own source of funds to get to that point.

Also remember that a bank or institutional lender will want first position mortgage security while a private mortgage lender may be ok with a second or even third mortgage position depending on the project and the equity in the property.

For residential builds, banks typically require you to get both the construction financing as well as the long term take out mortgage through them, otherwise they will not provide construction financing by itself.

Each situation is going to be different and there can be significant pros and cons to consider between difference sources of construction financing from one project to the next.

If you are planning a construction project, or are in the middle of one right now, and require construction financing to either get started or complete the work already underway, then I suggest that you give me a call so I can quickly go over your situation and provide relevant options for financing a construction project.

Click Here To Speak With Toronto Construction Mortgage Broker Joe Walsh

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