Ontario land development loans are provided through both institutional and private mortgage sources, although the majority of development work will likely be financed through private lenders.
Land development financing can be required by a builder, developer, or property owner looking to improve the condition of a property and/or add infrastructure to the property to promote future use.
For larger real estate development projects, the development work is typically completed in phases of similar size. A land development loan is acquired to fund the costs of a single phase and once the phase is complete and sold off, the land loan is paid down and the funds remain available for the next phase of construction.
For the earlier phases of development, there is more land available for security, but the market value may be low due to the still unrealized potential of the development. With the completion of each phase, there will be less land available for security for the next phase, but the land value will likely increase as lots are sold and houses are built and put into use.
Even when a builder purchases a series of semi developed lots with roads and utilities installed, the builder may also require a land development loan for landscaping and other site preparation requirements that need to be completed before building can commence.
Because of the speculative nature of land development projects, its harder to get institutional financing in place unless there is considerable equity in the project and there are a significant number of pre sold lots already in hand prior to the advancement of an Ontario land development loan.
Private mortgage lenders that get involved in land development loans tend to be individuals who specialize to some degree in similar development projects and are more than prepared to take the project over in the event of loan default by the developer or property owner borrowing the money. This is one of the key reasons why land development loans are mostly private as the risk of loss is more easily managed by individuals that specialize in this type of land financing.
If you need an Ontario land development loan, I recommend that you give me a call so we can review your requirements together and discuss relevant land development financing options that meet your needs.
Click Here To Speak With Ontario Construction Mortgage Broker Joe Walsh