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.