While interest rate and the overall cost of borrowing is always going to be the primary focal point of any construction financing discussion, the one construction mortgage element that is sometimes too easily assumed away as a given is the reliability of draw management for any given size and type of Ontario builder loans.
There is no question that the cost of financing is important and is a key expense item in the overall construction budget. But if construction draws don’t get issued on time and for the amount requested, draw in and draw out, there is going to be an accumulation of costs that could end up being far more significant than interest rate savings that could be achieved.
And the bigger the project, the more significant this aspect of selecting a construction mortgage lender becomes. Any builder with significant time in the construction business will attest to fact that construction draws can be absolutely brutal to manage and can lead to significant additional costs that no one bargained for or budgeted at the outset of the project.
For any given construction niche, the relevant Ontario builder loan providers will have a good understanding of the market and will price their construction mortgage products accordingly. The lenders that are committed to the market segment may tend to stay pretty firm on their pricing despite price pressure from competitors because they know that a commitment to making the draw process work for everyone will benefit them in the long run with repeat business and referrals.
More aggressive lenders that are focused on price tend to come in and out of the space as the only way to make money on thin margins is to make sure that there is very little risk to the lender at any time through the construction process which in many cases can lead to draw delays and advance reductions as the lender makes sure they are covered off in every possible way.
So the reality is that there is a cost benefit relationship to draw management. While lower interest costs are always going to sought, they should never be taken at the expense of draw management predictability.
If you’re seeking Ontario builder loans and want to get matched up with the best lender and rate combination for your particular project, I suggest you give me a call and we’ll go over your most relevant options together.