Builders and developers tend to find out the hard way that the construction loans in Toronto are typically both easier to secure and can be acquired for a higher percentage of the project costs compared to most other areas of the province outside of the GTA.
The the differences can be significant with Toronto based projects securing loan percentages as high as 80% and out lying areas 50% to 65%.
With the current capital market uncertainty, its also getting harder for lenders to take interest in projects outside of the Greater Toronto Area.
Most construction mortgages are issued by private lenders and most private lenders have a preference for construction loans in the larger centers where the resale markets and property values tend to be more stable, or at least that’s their perception.
This is good news for construction projects close to Toronto and not so good for places farther away. Even in cottage country, where the resale market is still quite strong, there is more apprehension by lenders to get involved in larger projects, and when they do take them on, the cost of financing tends to be higher than what would otherwise be expected for a construction loan.
The net result is that builders and developers not only have to start working on arranging financing for their projects further in advance, but they also have to be prepared to sink more of their own capital into the projects due to the likelihood of securing lower loan to value ratios than they are used to.
And because there is more competition among lenders for Toronto area projects these days, depending on the exact project type and location, there are opportunities for great private mortgage construction rates as lenders try to get their money placed in order to get their targeted return on capital.
So to get financing in rural areas or get the best deal in the GTA, more time is likely going to be required in both cases to locate and secure the most relevant construction financing for the overall project or particular project stage.
This is where a construction mortgage broker can become very important to the process and just another reason why you should give me a call so that we can review your requirements and work towards getting you the best construction financing deal available.