While a construction take out mortgage can be arranged before, during, and after the construction process is completed, the timing of when its arranged can directly impact the different types of construction building loans you’re going to be able to secure.
For institutional lenders, the take out mortgage is the only real incentive for getting into construction financing in the first place, so to secure institutional construction financing for your project, you’re going to need to qualify for the take out mortgage as well.
Private construction loans are less demanding of having a take out mortgage in place prior to the start of construction. The key for a private lender is what type of construction is taking place and where is the location of the project. If the private mortgage construction lender isn’t concerned about the ability for a particular project to arrange a take out mortgage, then it won’t likely be a requirement to have one in place prior to the start of the project.
However, if the project is viewed to have a potentially weak or thin resale market for the type of real estate or the location where its situated, then even a private lender can require the borrower, builder, or developer to have the take out mortgage arranged prior to any funds being disbursed.
Because privates tend to work through mortgage brokers, the mortgage brokers tend to be closely aligned with long term mortgage lenders that are interested in take out opportunities to expand their portfolios, so working with a good mortgage broker can properly align you with highly relevant sources of construction take out mortgages that will be interested in financing your completed project.
Probably the biggest challenge with take out mortgages is when you leave the application process too long into the construction project and end up scrambling to get one in place by the end of the construction process in order to save on interest costs and not break the terms of the construction mortgage payout requirements. If left too long, the best deal may be harder to come by than you expect, causing you to accept what may not be the best available offer in order to get the construction loan paid out.
If you’re considering a construction project or in the middle of one, give me a call so that I can quickly assess your situation and requirements, and provide you with relevant construction take out loan options for your consideration.