A Toronto builder mortgage can be arranged from both private mortgage and institutional lending sources depending on the specific construction project, the financial profile of the borrower, and the borrower’s financing requirements.
Builder mortgages for construction projections are very dependent on the exit strategy for the property or units to be sold upon completion of the work. The best exit strategy is to have pre sales in hand that are executed under solid agreements and have paid deposits paid into trust to support the commitment of the buyer.
Construction projects built on speculation of resale can also be funded, but there may be more financial backing required from the borrower to secure the desired funds.
A Toronto builder mortgage from a private lending source is going to be priced higher than an institutional lender, but will also get approved in a shorter period of time with a lot less application support documentation. To secure an institutional builder loan, the applicant is going to have to either have the time to go through the application process from scratch, or have a pre standing relationship with an institutional lender or bank where performance has been shown on past projects.
With construction financing from bank or private mortgage sources on projects with multiple resale units being created, there will be a pre defined builder loan pay down schedule on the sale of each unit in order for the lender to be comfortable providing the necessary security discharge that that buyer will require in order to acquire a clear title.
The amount of funds required to pay down the mortgage for each sale will vary from lender to lender and project to project to some degree, but for the most part, institutional lenders will require higher pay downs for security discharge than private mortgage lenders.
One of the ways to get the best builder mortgage deal is to work with a construction mortgage broker who has access to both institutional and private mortgage construction funds.
If you’re a builder or developer working in the Greater Toronto Area and require a Toronto builder mortgage, I suggest that you give me a call so we can go over your requirements together and then review different builder mortgage options that are available to you in the market place.