Before applying for construction financing, you need a construction financing budget that clearly lays out the amount of capital you require and when its going to be required during the construction period.

This starts with making sure you have all your costs either committed to through contract or invoice, or signed off through quote or estimate from all suppliers of good or services.

And because there can always be things that go wrong or changes can be made to the plan during construction, you should also allow a reasonable amount of capital for contingencies.

Once you have a clear picture of the total amount of construction financing that is required, then the next step is going to determine how much of the total costs will need to be funded out of equity and how much can be debt financed through a construction lender.

In some cases, it may be wise to allow for either equity or a secondary form of financing to be available for all or part of the contingency funds. This is so that if there are any tie ups with getting funds advanced from the main construction loan that you will still have an alternative source of funds available to keep the project going.

When you have developed one or more construction debt funding options, its going to be important to look at a number of things in the funding proposal or commitment.

In particular, you need to make sure exactly what the construction loan will and will not cover off in terms of expenditures, how and when funds can be disbursed, and debt servicing requirements of the construction loan during the time you are utilizing it.

With respect to expenditures covered, don’t automatically assume that all potential outlays that you may have to make on the project are covered by the construction loan. For instance, there are some construction lenders that will not advance funds to pay the GST or HST on a project and require you to cover off those amounts from other sources. If this is not understood at the outset, you can run into a real cash flow crunch when it comes time to pay your suppliers and vendors.

Knowing how the construction mortgage draws are going to be advanced is also important so that you can match up the costs incurred to the draw schedule at the start of the project in order to make sure that each cost to be incurred is properly matched up to the proper draw.

In terms of debt servicing, you’re also going to want to know what you’re going to have to pay monthly in terms of principal and interest payments. This can vary considerably from not having to pay debt servicing at all as its prepaid in the loan, to having to pay interest on 100% of the funding commitment, regardless of whether you are using all the money at one time or not.

By having a clear construction financing budget in place before signing a construction loan commitment, you’re greatly reducing the chances of having cash flow problems during your project.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Construction Financing Options

The post Construction Financing Budget first appeared on Ontario Construction Loans And Mortgage Financing.

“Make Sure You Can Cover Off The Toronto Construction Loan Basics Before Applying For Construction Financing”

Toronto Construction loan basics are pretty much what’s going to be required for any type of construction loan in Toronto or anywhere else for that matter. If you want a construction mortgage lender to approve your project for construction financing, in the time you have to work with, then its going to be important to have the basics in place.

Failure to provide the fundamental information will get you declined and also waste time.

Here are the core things that all construction loan providers are going to what to see or know are in place prior to considering your application.

First, is the land owned and in control of the borrower and are the necessary licenses and permits for the proposed project in place? This is step one and without it, everything else you can provide is theory as it all depends on control and permission being granted to the owner, builder, or developer.

Second, do you have a detailed and complete set of building plans and drawings. A picture is worth a thousand words and failure to be able to clearly describe and outline your project can make it difficult for a lender to understand what exactly you’re trying to accomplish.

Third, make sure that you have a detailed and accurate project budget and time line of implementation. For all the numbers being provided, try to have as much supporting information as possible. For instance, all significant budget items like contracts and material supplies should be supported by signed agreement or written quotations.

Fourth, be clear as to the equity you either have in the project or will put into the project if equity is required. If you have it in the project, you should have a recently completed appraisal to support the current value of the property. If you’re going to invest it in the project, then you should be able to show proof of funds.

Fifth, outline who is going to be doing the building and/or general contracting, their resume, other credentials, and their contract.

Going in with the basics will allow you to get the lenders attention and move forward with the application process even if there are a few other things not yet available.

If you have a construction project you’re working on that will require a Toronto construction loan, give me a call so I can assess your requirements and provide construction financing options for your consideration.

Click Here To Speak With Toronto Construction Mortgage Broker Joe Walsh

The post Construction Loan Basics first appeared on Ontario Construction Loans And Mortgage Financing.

“Here Are Three Key Steps To Getting Toronto Construction Financing In Place For The Terms and Rates You’re After”

When looking to secure Toronto construction financing for an Ontario based residential or commercial building project, you need to break down the construction financing procurement process in these three steps.

First, you need to make sure you’re applying to the most relevant construction mortgage lenders. All projects are going to have their own best supply fit and the sooner you zero in on the right audience, the faster construction financing will fall into place.

Second, once you’ve gone through the initial application process and found a construction mortgage lender that is prepared to commit to your project, you’re going to need to negotiate and finalize the conditions of a funding commitment. This is a step where lots of good funding opportunities fall to the way side due to the two parties failing to reach final agreement. Each project can have unique requirements and each lender will have its own funding policies, so its not a given that even though both parties are mostly in agreement that a final consensus on terms and conditions will emerge.

The last stage is actually getting the construction loan provider to issue a draw request. Before the first draw is advanced, the construction financing source does not have a vested interest in the project and can hold off advancing funds indefinitely if the lender does not feel that all the terms and conditions of funding have been properly met. Its not a given by any stretch that just because a signed commitment to fund a construction project is in place that funding will actually flow when its supposed to or at all.

Until all three steps have been complete, there is no Toronto construction financing. And because funding can fall apart at any point, there is always risk that there will be construction financing problems.

To increase your probability of both securing and getting a construction loan funded, its highly recommended that you work with an experienced construction mortgage broker that has experience navigating through all the things that can go wrong during the construction financing procurement process and help keep both your budget and time line on track.

Click Here to Speak To Toronto Construction Mortgage Broker Joe Walsh

The post Three Steps To Getting Toronto Construction Financing first appeared on Ontario Construction Loans And Mortgage Financing.

“If You Can’t Pass The Pre-sale Test, There Won’t Be Any Construction Financing Advances”

For larger construction projects where the exit strategy for the builder or developer to pay back the construction is through the sale of finished residential or commercial units being built, then the key to not only getting approved for a construction loan as well as getting draws advanced will be your ability to pass the construction lender’s pre-sale test.

First of all, each lender is going to have their own way of assessing the number of pre-sales that are going to be required to get construction funded, but typically the proceeds from presold units will need to equal the construction costs.

Its also not uncommon for a builder or developer to have most of the pre sales in place at the time of loan approval, but still requiring additional sales prior to the first draw advance. But just because you have a construction mortgage commitment in hand, does not mean that the lender will have any leniency if you’re short a unit or two when money is required.

Even if you have all the required sales in place, you need to make sure that you can verify each sale to the satisfaction of the construction loan provider. And when I say each sale, please take me literally. Bank and institutional mortgage lenders are very much by the book in most cases, and will go through the supporting documentation for each sale you pledge as a pre sale to cover the construction covenant.

And while all lenders will have their own requirements and verification process, here are some typical things you can expect to be required. First, the pre sale agreement must be binding upon the buyer via a pre-approved sales agreement with a material deposit held in trust for the committed obligation. The amount of the minimum deposit may also be established by the lender. Second, the sales are going to have to be at arms length in order to avoid any contrived sales that are put together to make the presale quota. Third, block sales for several units will under go a higher level of verification to make sure the sellers intention is to truly purchase multiple units and that sufficient funds are being held to support the claim.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh

The post Importance of Presale Verification For Construction Financing first appeared on Ontario Construction Loans And Mortgage Financing.