If you are contemplating or are in the middle of a construction project in Toronto proper, then you’ll be happy to know that the construction financing options both in terms of available lenders and program options are much higher in the big smoke than areas just outside of the GTA.
The reason for this is simple. Toronto based real estate is always going to have an active market. The closer you get to the core, the more sought after land is, regardless of what’s sitting on top of it.
So for a construction mortgage lender, some of the typical risks associated with construction financing are not nearly as severe as they are in more outlining areas where the real estate market, no matter how strong, is not Toronto.
As a result, there are lots of lenders servicing a wide variety of construction financing niches in the area. Because of the competition for projects in prime real estate areas, private mortgage financing utilized for construction loans can also be slightly cheaper than in other areas.
But aside from rate, the biggest gain a borrower or builder can get when looking for a construction loan is the percentage of loan costs that will be covered. If the project is in a good location and has strong market dynamics, its not unheard of for a private mortgage construction lender to provide 100% of the financing costs. In most nearby markets, unless there is considerable equity available in the underlying property, its pretty standard that even private mortgage lenders will want you to pay for at least the first 20% of construction costs before the first mortgage advance can take place.
Banks and other institutional lenders are also more aggressive in the Toronto area for the same basic reasons. This doesn’t necessarily mean that bank issued construction mortgages are going to be any easier to deal with in Toronto compared to other locations, but it does provide more rate and term competition among lenders as financing on the long term asset through the construction take out mortgage will be a strong addition to any mortgage lender’s portfolio.