A Brampton property development loan can be required for any type of activity that improves the value of the property. This definition would typically exclude a construction loan for building construction and focuses more on the costs that get invested in improving a bare land piece of land, up to the start of building any structures.
Real estate property development financing can come from both bank and private mortgage lending sources. The related financing will almost always be secured by a real estate mortgage on the property and/or another unrelated property offered as security.
When the property development work is substantial in nature, the mortgage lender may require a post work appraisal and a draw schedule when key segments of work are completed that will increase the value of the property. In this way, more funding can be made available to the project provided that there is a progressive value increase as money is being spent.
Brampton property development loans typically will be issued from 50% to 75% of the fair market value of the property being offered up as security in either the existing or future state, depending on the project and the lender program being accessed. To get to the higher loan to value amounts, the property must reside in an active market with potential presales already in place for lots that will be sold off once the development work is completed.
For institutional property development mortgages, presold lots or property units may be required to secure this type of financing. Alternatively, the borrower will have to provide a strong personal or business covenant in addition to the mortgage security to attract the cheaper forms of financing.
More typically, Brampton property development loans are provided by private mortgage lenders that have a focus on real estate development financing which allows them to more quickly assess the risk and understand what actions to take in the event of a borrower default which could include taking over the development if necessary.
If you’re in need of a Brampton property development loan or mortgage, one of the best approaches is to work with an experienced mortgage broker who has access to both institutional and private mortgage lending sources that provide this type of construction real estate financing in the local market area.