Its not uncommon that someone contacts me to better understand how to arrange construction financing for some form of facility expansion on an existing property.

The typical scenario has a property that already has a residential or commercial mortgage in place and the plan is to add to or expand the existing property holdings.

Another scenario would relate to someone asking if they could get the existing mortgage renewed along with some existing funds for construction that could be drawn down in the future.

In just about all cases, a construction loan is going to be a new borrowing facility, separate and distinct from the mortgage or mortgages now in place.

One of the main reasons for this is that the construction process has risk, so there is a higher cost of financing associated with this type of funding than for a completed project or existing piece of real estate where the buildings attached are in a completed state.

So the first thing to remember is that a construction financing facility is separate from all other loans or liens.

Therefore, its going to be near impossible to refinance an existing mortgage with some extra funds for future construction, especially at lower rates of interest, due to the different uses of funds.

Lower cost lenders will typically want a first mortgage position as well, so it may not be even possible to arrange construction financing from a bank where a significant existing mortgage is in place.

If there is enough equity in the property and the amount of financing required is small enough, you may be able to arrange a secured line of credit against the property.

But the most common form of construction financing in these situations is from private lenders as they are prepared to go into a second mortgage position to secure the construction loan for amounts that are more reflective of the end of construction market value.

The challenge with private lending is that when financing is approved, it is expected that funds will be drawn shortly there after as unlike a bank, private’s have a more finite amount of capital available, and want to have their money out in the market earning interest as quickly as possible after it becomes available.

So planning months ahead is certainly a good idea, but if private lending is the ideal source, then the application and commitment process will need to occur closer to when the funds are needed.

This is one of the reasons why it can be so important to work with a mortgage broker that has a focus on construction funding from private sources. The broker can get you qualified in advance and then place the deal with a private source that can fund your deal at the time when funds are required.

The last thing to consider in your pre planning process is how the construction funds will be repaid over time.

If you want to refinance it into your existing mortgage, then it would be wise to find out the cost and procedure for doing so. Planning further in advance, especially before the existing mortgage is renewed, may allow you to structure your mortgage renewal in such a way to make a further refinancing of the construction take out more cost effective.

Or if a new lender is going to be required for the refinancing of both the existing mortgage balance and the construction loan funds, then this should also be explored with options understood prior to starting the construction project.

Once again, there can be many variations around this theme which is another reason to utilize an experienced mortgage broker who can work through each scenario with you and come up with the best options to consider.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

Property Expansion Financing

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

If you’re looking to secure a construction loan for a project you’re in the middle of, or one you’re planning to proceed with, then you’re going to need to decide if you’ll be working with a private or bank lending source.

With construction, private lending is not automatically considered a secondary choice as their are features and benefits to a private mortgage related to construction that are not always present with a bank or conventionally funded mortgage.

The first thing to look at is the existing financing, if any, that is on the property where construction will take place.

If you have a bank mortgage in place right now in first position at a good rate you may want to leave that in place and proceed with a second mortgage for construction financing.

In this particular situation, you options will be almost exclusively limited to private lending options as banks do not provide construction loans in a second mortgage position.

This is one of the main reasons that borrowers opt for a private mortgage on construction as the weighted average cost of capital on their first mortgage and a private second may be better than the total costs of refinancing everything into one new first mortgage.

The bank construction financing option is going to be the lowest stated cost of financing, but also the most conservative in terms of financing amount, financing commitment, and draw administration.

If you want to take advantage of the potential lower cost of bank financing for a construction project, you’re going to need to be offering first position security to the lender, have enough lead time to work through the application process, be able to be approved for a long term take out mortgage prior to construction, and have a contingency allowance available to you if there are any delays in draw advances or reductions in draw amounts.

While many types of private loans are targeted to people with bad credit, in the construction financing market, private mortgages are more about the speed of getting something in place that can sit in a second mortgage position, and the greater predictability in the draw advance schedule, providing true value for a higher cost.

From a financing point of view, the options related to each project can be somewhat unique, and at times difficult to figure out.

One of the best ways to work through both bank and private construction lending options is to work with a construction mortgage broker that deals with both types of lenders.

By taking this approach, you can not only get access to the most relevant options, but have some expertise available to you to compare and contrast the different choices available to you.

If you require assistance in this regard, then I recommend that you give me a call and we’ll go over your situation and requirements together.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

ontarioconstructionloans.ca

The post Deciding On Bank Versus Private first appeared on Ontario Construction Loans And Mortgage Financing.

Professional building construction financing is available through our lending network for a wide range of construction projects and financing amounts.

For this type of building project, lenders are interested in the location and design of the building as well as the post construction list of committed tenants and the marketing plan that will secure the vacant space by the time construction is completed.

Professional building construction mortgages can basically come from three different financing sources.

The first and lowest rate, lowest risk form of construction loans comes from banks and institutional lenders. Because of the lower risk financing position, considerably more time is going to need to be invested in the application and qualifying process as compared to the other categories of financing. Even after qualify for a bank construction loan for the a professional building project, the builder, developer, or property owner should be well versed in draw advance procedures of the lender which can be hard to satisfy at times and can require incremental sources of capital be brought into the project on short notice to keep the project on track.

The second category of professional building construction mortgages comes from quasi institutional sources such as investment funds, investment banks, hedge funds, and so on. This group of debt lenders are basically targeting construction projects that either do not quite satisfy the requirements of conventional lenders, or do not have the time available to complete a bank or institutional lender’s application process.

The rate will be slightly higher, but the process for qualifying for funding as well as the draw advance process will also likely be more straightforward. So with higher cost comes incremental benefits to this category of lending for professional building projects.

The third form of professional building construction loans is from private mortgage lenders. Projects under $3,000,000 can potentially be financed by one private lender or a small group of privates while the larger deals will typically be considered by mortgage investment funds or larger syndicates of private lenders.

Once again the cost of financing is going to be higher than what you would pay at a bank, but when time is short to get construction financing is place, this could very well be your best option. And, similar to the quasi institutional lending category mentioned above, the draw advance schedule tends to much more predictable with private mortgage construction financing.

If you are in need of construction financing for a professional building project you are are planning or are in the middle of, I suggest that you give me a call so we can do through your requirements together and discuss different professional building construction financing options available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Professional Building Construction Financing first appeared on Ontario Construction Loans And Mortgage Financing.

Student resident development construction financing is available through a number of lenders in our funding net work.

This can include financing for the purchase of land, site development and service installation, and the construction of building(s). During the project, we can also arrange construction bridge loans if cash flow requirements are higher than expected to complete the work, and at the end construction we can also arrange a long term take out mortgage if the property owner or developer is planning to retain the asset long term.

Funding options range from bank and institutional lender programs to sub prime and private lending alternatives.

For the lowest cost construction financing for the building of a student residence, there are a number of things to consider.

First, you are going to need to have 20% to 30% of the total project costs available in cash, and you’re going to have to invest your funds into the project before a lender will make their first advance.

Second, you are likely going to have to provide a first mortgage position to the construction financing lender on the property where the student residence is going to be built.

Third, you will have to have the property zoning and permitting in place for the project to move forward.

Fourth, the project will require a complete set of drawings and an as complete art rendering of the Student Residence once complete.

Fifth, the builder or developer will need to meet the qualifications of the lender including a resume of similarly completed projects. For smaller scale student resident developments, self builds can also be financed, provided that there is a building track record among the owners to support the completion of the proposed work.

Sixth, the project will require a detailed budget and cash flow timeline so that cost items can be agreed to and draw advance scheduled be prepared.

Seventh, there will need to be market research that shows the market demand for the project as well as a marketing plan to either sell or rent out the units. In either a sales or rental scenario, pre sales or rental commitments may also be required by the lender.

In the event that a project cannot qualify for bank or institutional student resident development financing, we also can pursue sub prime and private construction mortgage financing options on your behalf.

The cost of these options are going to be higher than a bank or institutional construction loan, but the lender conditions to approval and funding, as well as the timeline to complete the application and funding process can be considerably less than what you may experience with a conventional lender.

All student resident construction lenders are also going to want a clear idea of the exit plan to get them paid out. This is another area we can assist you with arranging either prior to construction or even during the construction process.

If you have a student resident development that you are planning and will require construction financing for, or if you are in the middle of construction of a student residence and require a construction bridge loan to complete the work, I suggest that you give me a call so we can quickly go through your requirements together and discuss student resident construction loan financing strategies available to you.

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

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

Commercial construction financing is typically arranged for a specific stage of a construction project.

For instance, most commercial projects have two or more stages of development and each can have their own financing requirement.

An example would be where the project first requires financing to acquire the land. Once proper zoning and permitting is in place, the project would move to site development and from there move into building construction. Once the project is completed, a take out mortgage would likely be required if the project was being retained by the owner, or by a purchaser wishing to acquire the completed project.

Each of these stages, mostly because of timing, will require their own unique commercial construction financing facility.

And while the same property is used to secure the different construction loans or construction related loans, each incremental financing requirement may end up repaying the previous one, or there may be more than one charge against the property, provided there is enough value in the real estate to carry additional debt.

As a project goes along, the value will increase, which provides more security for additional lending required at each successive project phase.

For each new commercial construction loan acquired, there may also need to be an equity injection required in order to keep the debt equity ratio in line for the lender or lenders.

Because of the multi phase aspect of most commercial projects, its important that all commercial construction financing facilities are aligned so there is a seamless transition from one to another during the project life.

The more the entire commercial construction financing is planned out in advance, the less headaches and cash flow issues for the project and project owners and managers.

Further, the commercial construction loan draw process tends to longer and more difficult to manage as compared to a residential home build, so its also important that each construction financing facility is well aligned with the project cash flow and timelines.

If you are in search commercial construction financing for a project you are planning out, or one that you are in the middle of, I suggest that you give me a call so we can go over your requirements together and discuss relevant commercial construction loan options that can meet your needs.

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

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

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

The post Reverse Engineering Construction Financing first appeared on Ontario Construction Loans And Mortgage Financing.

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

The post Financing A Construction Project first appeared on Ontario Construction Loans And Mortgage Financing.

Construction financing to permanent loan rates are going to vary considerably due to a number of potential factors.

On the construction financing side, rates are going to depend on the source of funds or lender category you’re dealing with and the security position offered to the lender.

For instance, construction financing from a bank or institutional lender is going to be a prime plus instrument somewhere between 1% and 3% above the prime rate in most situations.

Private mortgage financing of a construction project will see rate range from 8% to 11% for most projects for first mortgage position. If a second mortgage position is provided as security to the private lender, then the rate is more likely to fall in the 10% to 14% range.

At the other end of the spectrum in the construction financing process is the permanent long term loan that will pay out the construction loan.

When the construction financing is being arranged through a bank or institutional lender, many times it is a requirement of financing that the long term take out mortgage, if one is required, also be provided by the bank.

The long term permanent loan rates in these cases are likely going to be at or close to the bank’s posted mortgage rates.

In situations where the builder, developer, or property owner intends to secure the construction financing from a different lender than the permanent loan source, there can be further variability in the interest rate on the permanent loan.

For instance, market conditions aside, permanent loan commitments offered at the beginning of a construction project may have higher rates than permanent loan offerings at or near the end of the project.

The reasoning here is that once a project is completed, not only is the construction risk taken away, but a well done and attractive looking end product that is well situated in its market is going to be a more attractive asset to finance that something planned out on paper that is yet to be constructed.

There are different strategies one can take to try and get the best rates for both the construction financing portion of a project and the long term take out loan. Each approach will need to be curtailed and adjusted to fit the requirements of the borrower and the project.

If you are looking to secure construction financing rates and/or permanent loan rates to capitalize the construction costs at the end of the project, then I suggest that you give me a call so we can discuss your requirements as well as different approaches you can take to optimize rates.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Construction Financing To Permanent Loan Rates first appeared on Ontario Construction Loans And Mortgage Financing.

…Call 647 933 1090 Today!…

Free Report On Construction Financing The 7 Pitfalls of Construction Financing and How To Avoid Them

Click Here To Speak Directly With Construction Mortgage Broker Joe Walsh

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

Before applying for construction financing, you need a construction financing budget that clearly lays out the amount of capital you require and when its going to be required during the construction period.

This starts with making sure you have all your costs either committed to through contract or invoice, or signed off through quote or estimate from all suppliers of good or services.

And because there can always be things that go wrong or changes can be made to the plan during construction, you should also allow a reasonable amount of capital for contingencies.

Once you have a clear picture of the total amount of construction financing that is required, then the next step is going to determine how much of the total costs will need to be funded out of equity and how much can be debt financed through a construction lender.

In some cases, it may be wise to allow for either equity or a secondary form of financing to be available for all or part of the contingency funds. This is so that if there are any tie ups with getting funds advanced from the main construction loan that you will still have an alternative source of funds available to keep the project going.

When you have developed one or more construction debt funding options, its going to be important to look at a number of things in the funding proposal or commitment.

In particular, you need to make sure exactly what the construction loan will and will not cover off in terms of expenditures, how and when funds can be disbursed, and debt servicing requirements of the construction loan during the time you are utilizing it.

With respect to expenditures covered, don’t automatically assume that all potential outlays that you may have to make on the project are covered by the construction loan. For instance, there are some construction lenders that will not advance funds to pay the GST or HST on a project and require you to cover off those amounts from other sources. If this is not understood at the outset, you can run into a real cash flow crunch when it comes time to pay your suppliers and vendors.

Knowing how the construction mortgage draws are going to be advanced is also important so that you can match up the costs incurred to the draw schedule at the start of the project in order to make sure that each cost to be incurred is properly matched up to the proper draw.

In terms of debt servicing, you’re also going to want to know what you’re going to have to pay monthly in terms of principal and interest payments. This can vary considerably from not having to pay debt servicing at all as its prepaid in the loan, to having to pay interest on 100% of the funding commitment, regardless of whether you are using all the money at one time or not.

By having a clear construction financing budget in place before signing a construction loan commitment, you’re greatly reducing the chances of having cash flow problems during your project.

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

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