Ontario cottage construction loans are not a whole not different than other forms of residential construction financing that are available within the province.
Similar to urban residential construction financing, most construction loans in cottage country are provide by private mortgage lenders. In fact, cottage country likely has an even higher percentage of private construction loan due to the larger diversity in cottage properties, many of which will fall out of the conventional lender’s construction financing box.
That being said, banks and other institutional lenders will still provide cottage construction loans provided that all mortgage requirements for these programs can be met, including pre-qualification of take out mortgage before the project begins.
For private mortgage lenders, the biggest difference with financing cottage construction tends to be lower loan to value ratios. In a large urban area, private construction financing can cover as high as 100% of the project costs, provide that there is sufficient value in the underlying real estate. But in cottage country, this loan to cost ratio can vary widely depending on location and project type.
For Ontario cottage construction loans in general, the loan to value financing ratios are lower outside of the Greater Toronto Area than within it. Sometimes private lenders can go down to 50% to 60% of the construction costs depending on their personal assessment of the strength of the local resale market.
This will also vary from one cottage area to another as some areas are larger with more resale activity which become very important to a private lender in the event of mortgage foreclosure.
Rates and fees can also be slightly higher as well as the related draw management costs. If third party inspections are required, the costs of these services can be higher if qualified individuals are coming from outside the area to perform their work. This can also cause project delays as the draw process may take longer to complete.
If you’re planning an Ontario cottage construction project and need financing to start or complete the work, I suggest you give me a call so I can quickly assess your requirements and provide relevant Ontario cottage construction loan options to consider.