The condo development loan financing requests we get can be extremely varied at times with different challenges that need to be overcome to get funding in place.

The variability inherent in the requests is due to the uniqueness of each development project and the challenges each one will encounter along the way.

Our goal is to quickly understand what your current financing needs are and exactly where you’re at in terms of completed work, property owned, and debt outstanding so we can zero in on the most relevant options available to you.

One of the many challenges that clients face when looking to get a condominium development loan or mortgage for a residential project is that they don’t have enough completed pre-sales to qualify with most of the main line financing programs in the market.

Many times we will get a financing request from a condo project where the presales are in the 40% to 50% range and the lender requirements are more in the 70% to 75% range.

In these situations, a short term bridge loan against the equity in the project is likely going to be a better approach than continually trying to secure a larger build out construction loan where the presales criteria is lower.

If the developer owns the property and has completed a certain amount of work to date, then there is a good chance the property has gone up in value. Even if there is first mortgage in place, there can be enough built up equity to allow for a bridge lender to come in to the deal in a second position.

The deal is appealing to a bridge lender because the development already has a lot of pre sales in place and a marketing system generating pre sales. The short term lender will be paid out by the longer term development loan that can be secured once a high number of presales have been made creating an exit strategy for a bridge financing solution.

While the funds provide by a bridge loan will not be sufficient to meet the long term needs of the project, it will allow the project to continue and allow time for presales to be built up.

This can be a very effective strategy to keep the project on track while building a bridge to the larger scale construction development loan that the project will require.

This is one of many challenges that a condo development project can have where alternative financing strategies can help move the project along.

If you have a condo development project that is classified as residential that you’re planning or are in the middle of, I suggest that you give me a call so we can review your financing requirements as well as relevant funding options that could be available to you in the market place.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Residential Condo Development Financing Options.

The post Condo Development Loan Financing first appeared on Ontario Construction Loans And Mortgage Financing.

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

The post Construction Financing For Land Servicing first appeared on Ontario Construction Loans And Mortgage Financing.

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

The post Subdivision Development Financing first appeared on Ontario Construction Loans And Mortgage Financing.

The Toronto development financing market has been a tough one to pin down at times since the start of the 2008 recession.
As developments go in general in Ontario since 2008, there have been more looking for money than moving ahead at times, creating a girth of projects either not started or unfinished.

So the on going question is where are things at now and what can developers look forward to seeing with respect to Toronto development project financing?

Well, according to a recent article in the mortgage broker news, vacancy rates for down town Toronto office buildings are back into single digits, indicating that the supply in the market is being taken up and that this lead to more new downtown construction projects in the near future. See article here http://www.mortgagebrokernews.ca/news/development-may-return-to-toronto-office-market/106610

The combination of commercial lenders in general getting more active in the lending market with the prospect of new projects coming online, is a good sign for Toronto development financing overall.

While the prime interest rate stays at 3.0% and the bond rate remains at the low end of the pricing spectrum for the most part, there cost of financing is currently very attractive, but is likely to change in the months ahead as the bank of Canada keeps a close eye on inflation and economic growth.

Another key factor with the cost of financing, believe it or not, is the Federal election.  A conservative majority would provide the most potential interest rate stability while an NDP minority government, the least.

Compared to what we have witnessed over the last three years, most factors are pointing to more free flowing commercial mortgage financing for development projects in Toronto and in other parts of the province as well.

One big difference we can expect though from the pre 2008 period is higher lender financing criteria for development projects and with greater scrutiny applied by lenders before making financing decisions.

That being said, if the market starts to heat up and lending competition increases, there will likely be some slacking of the current lender review process .

As always, there are many factors in play, several of which may change quite a bit in the weeks ahead.

But all in all, the Toronto development financing market is the strongest its been in quite some time and with the increase in office space demand appearing to be on the rise, commercial lenders are much more likely to compete harder for up and coming projects in the area due to the strength of the market dynamics which strengthens their real estate security position.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Toronto Development Financing first appeared on Ontario Construction Loans And Mortgage Financing.

“We Arrange Toronto Real Estate Development Loans From Institutional and Private Mortgage Lenders”

Toronto real estate development loans are typically acquired to fund site preparation for building construction and for the installation of site infrastructure such as roads and utilities.

Real Estate development mortgages can be secured in either first or second position on the property being developed and/or on other properties offered as additional security by the borrower.

When larger developments are completed in phases, a property development loan is typically sought for the cost of one phase. When the phase is completed and sold off to builders or other developers, the loan is repaid and further utilized on the remaining phases. The key to this type of financing is maintaining the loan to value that the lender will require at any given time. As development phases are completed and sold off, the subject property available for security is reduced as well. So if the overall security value does not increase over time, the loan amount will likely need to be reduced by some amount of equity investment.

Toronto real estate development mortgages from institutional lending sources will have a higher emphasis on the ability for the project to cash flow the debt servicing on a monthly basis while private mortgage financing sources are going to be most focused on the overall exit strategy and time lines to repay the site development loan.

Private lenders tend to provide the majority of this type of financing whether from an individual private lender, syndicate, or mortgage investment corporation. This category of private lender will tend to focus on this type of construction mortgage financing project and typically are versed in the development market in the particular area in which they extend real estate development loans.

While institutional financing is also available for certain projects, this form of financing will be more difficult to qualify for and will require more time to get into place. In addition, the draw administration process can become hard to predict at time from conventional sources almost making it a requirement that the borrower have some amount of contingency capital available for situations where there are delays in receiving scheduled advances.

If you require a Toronto real estate development loan, I suggest that you give me a call so I can quickly assess your options and provide relevant site development financing options for your immediate consideration.

Click Here To Speak With Toronto Construction Mortgage Broker Joe Walsh

The post Real Estate Development Loans first appeared on Ontario Construction Loans And Mortgage Financing.

“Construction Development Loans Tend To Follow a Certain Pattern For Approving Financing, Advancing Capital and Mortgage Repayment”

Its not uncommon for a real estate developer to want to secure sufficient capital to complete the total project.

While this may be the desired result, it tends to be impractical from the view point of a construction mortgage lender unless there is a substantial amount of real estate security offered.

Construction development projects are, for the most part, funded by private mortgage lenders in the form of individuals or private mortgage corporations.

The focus of the construction mortgage lender is going to be on how much is the property worth in its current state, and how many units of the development are pre sold?

As an example, lets say a developer has purchased a piece of property for $2,000,000 and has sunk $1,000,000 into road access for the initial sites that will be sold. The entire project include 100+ lots for development, but the initial development loan will likely be for no more than 65% of the current property value, or in this case, say 65% of $3,000,000.

This financing reality will cause the developer to break the project down into phases to fit within the money being provided. To get the project going faster, its not uncommon for the developer to sell a portion of lots to other builders to increase the available capital for their own development efforts within the project.

Construction mortgage funding is then approved for the initial phase of construction and mortgage funds are advanced on a  predetermined site development or lot build out schedule.

During the completion of Phase I, the mortgage is repaid as serviced lots are sold to other builders and completed living units are sold to consumers.

To start Phase II, the process basically repeats itself, based on a revised appraisal of the property remaining.

While developers would prefer to have a revolving line of credit that could be reused from one phase to the next, the private mortgage lenders tend to look at each phase independently. This means that for each new phase, the developer is going to have to pay a mortgage fee on closing of a new mortgage agreement for that particular phase as well as the monthly interest cost for the money that has been committed.

Depending on the lender, monthly interest charges can be based on funds being utilized or total funds committed, regardless if they have been advanced or not.

If you need assistance with a construction development financing requirement, I suggest you give me a call so we can review the requirements and go over the most relevant construction mortgage financing options available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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