A Kitchener land development loan can be for a small project under $50,000, or for work that will require millions of dollars invested in property and site development. Most of the time these type of construction loans are financed by way of a mortgage registered against the property where the work is being done. In some cases, additional property may also be pledged as security in order to provide the equity portion that a certain lender will require in order to advance the amount of funds required.
Land development loans or mortgages are provided through both banks and private mortgage lenders. While each case is somewhat unique, one of the main lending criteria that separates an institutional or bank loan from a private mortgage is the strength of the repayment profile of the borrower. While private mortgage lenders are also concerned with repayment, their primary focus in on the market value of the property before and after the site development work is completed as well as the exit strategy that will eventually repay the mortgage being advanced.
Typically, a site development mortgage can be arranged from between 50% to 75% of the value of the property. With structured work and construction draws at key project completion points, the value added to the property from the work as completed can also increase the property value considered for the mortgage which can result in a larger loan being extended over the life of the work schedule, provided that the work is completed in accordance to what was planned out at the start of the mortgage application.
While institutional land development loans will come at a lower cost of borrowing, they will also take longer to take in place and likely have a more stringent draw management process to deal with. In order to take advantage of bank financing for a given Kitchener land development loan requirement, its important to understand the terms and conditions of bank financing before applying so that enough time and effort can be factored into the application process.
If you need a Kitchener land development loan, I suggest that you give me a call so I can quickly assess your requirements and help you get aligned with the most relevant mortgage lending program as soon as possible in order to keep your overall planning process on track.