Most construction loan agreements are written with a timeline for you to utilize the funds.
If you run out of time before the project is completed, even if for some unforeseen reason that extended the construction process, its going to be important to understand how you deal with this.
The best way to deal with any construction loan timeline is to make sure that whatever is agreed to between yourself and the lender is far in excess of what you will need for time, even when factoring in the unforeseen.
The next step is to make sure that you have the ability to extend the period or have an option to extend, and outline what the costs of an extension would be.
In the event that you do run out of time and there is no chance for an extension, then you should also clearly understand at the outset what the cost is going to be to potentially be breaking your long term take out mortgage if its connected to the construction loan and if you are forced to go elsewhere for the rest of the required construction financing.
While the expiry of the funding period doesn’t happen very often, it does occur and the result can not only be disruptive to the overall construction project, but costly to resolve.
One of the ways to deal with an expiry of the construction loan advance period is to get a construction bridge loan in place from a private mortgage lender.
If you have gotten a long ways into the project already, there will likely be an significant increase to the property value from the work completed, which can allow a private mortgage lender to go behind the existing construction loan in the mortgage registration cue and put a second or even third mortgage in place to provide the capital required to complete the project.
The smaller the amount of money required, the easier its going to be to get a construction bridge loan into place.
And if the project is close to completion, the private lender due diligence will likely be minimal, allowing you to get incremental funding in place in a matter of days.
Of course the best approach is to avoid the need for any additional constructions loans in the first place and this is accomplished by making sure your project plan fits the timelines provided by the lender plus some allowance for contingency time. And if you still are running out of time, that you have options to consider with the original construction lender that will be acceptable to you.
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