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“Kingston Construction Mortgage Financing For Residential and Commercial Projects”

We provide Kingston construction mortgage financing to builders, property owners, and land developers from a variety of different construction lending sources including both bank and private mortgage lenders.

Because one of our specialties is construction financing in the southwestern Ontario area, we stay on top of the market and make sure our customers have access to any type of construction related financing they may require.

Most construction projects have at least two or three separate construction financing mortgages and each of these may even need to come from a different lender. So to make sure everything flows smoothly, its important to work with a construction mortgage broker that can not only access the construction funding you require for a particular application, but also help you seamlessly transition from one financing source to another.

If you take a self build home project as an example, the owner may or may not need a mortgage to acquire property where construction will take place. Next, they will require the construction build loan and once its complete they will need a construction take out mortgage to consolidate all previous costs into a long term mortgage.

For larger residential and commercial projects, there can be even more funding requirements by phase of project, which can also range from standard debt financing to mezzanine financing as well.

The larger the construction project, the more complex the administration of the construction financing can become, especially when you’re working with an institutional source for your Kingston construction mortgage. This is an area where experience can mean everything in getting problems with cash flow solved quickly and having the overall project stay on track.

If things do go awry for some unforeseen reason, we also can provide out clients with construction bridge loans to cover cost overruns or draw cut backs or other funding shortfalls. Depending on the project, a construction bridge loan can many times be put into place in just a matter of days.

If you’re in need of a Kingston construction mortgage for a project you’re planning or in the middle of, give us a call so we can quickly assess you requirements and provide relevant construction mortgage financing options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh.

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

“If You Have Multiple Construction Mortgage Offers, How Do You Determine Which One Is Best For Your Project?”

First of all, if you’re planning a construction project and you’ve got multiple construction mortgage options in hand, you’re in great shape compared to the owners and builders scrambling around for construction financing capital at the 11th hour.

So the challenge then becomes deciding on which option you want to go with or making a decision to find better options if you think you can do better than what you already have or if what you already have does not exactly meet your requirements.

What criteria is the most important? Is the decision making process all about the cost of financing? What other things should carry some weight in the decision making process?

As far as rates are concerned, they are always going to be important to some degree. That being said, if the interest rate of a construction mortgage is your primary decision making criteria, that can also be a major mistake in many cases.

So how do you go about deciding what financing option to take?

First, make sure that you’ve thoroughly reviewed the written commitment that the bank or financial institution has provided. Does it meet all your project financing criteria including and excluding the interest rate? Look for the bank’s “out clauses” to determine how firm the commitment really is.

Second, identify any terms, conditions, or clauses that you don’t feel you can live with. Before dismissing the commitment there may be room to negotiate, especially if your project is strong enough to attract competitive offers.

Third, ask for the lender’s draw management procedures to better understand what will be required before funds are going to be advanced, especially for the first draw. If this part appears too onerous, then it can easily become a more important criteria than the rate.

Fourth, try to develop a comfort level with the people you will be dealing with. Construction mortgage administration can be a hair raising experience at times so you want to make sure that the people you’re going to be working are individuals you feel you can trust and will work towards a fast and fair resolution of any issues that may arise during the life of the construction mortgage.

Fifth, if the offers you have are close to what you believe is available to you, be careful not to get too greedy. The market can be very fickle and unpredictable. Even if you’re convinced that a better deal is out there somewhere, how long will it take to find it and if you can’t find it in time, will the other deals still be there to choose?

Click Here To Speak With Construction Mortgage Broker Joe Walsh.

The post Choosing The Best Construction Mortgage Offer first appeared on Ontario Construction Loans And Mortgage Financing.

“Here Are The Different Types of New Home Construction Loans And Their Related Requirements”

New home construction loans are typically either provided for a home builder that is building out lot inventory for the purposes of resale, or for a self build scenario where the eventual home owner finances the project all the way through construction.

For home builders, new home construction loans will require the builder to provide home owner insurance and have sufficient equity in the project to support the construction loan amount. If the builder owns a number of lots or even additional property, a lender can take real estate that is unrelated to the construction project as security.

The key elements for home builders is the equity they have in the project or can provide in the form of other real estate security, and the sale status of the home being built. If the home is pre-sold subject to the completion of construction, there are going to be more construction financing options available versus scenarios where builders are creating inventory for future resale.

For self build scenarios, new home construction loans can be secured through major banks and mortgage companies provided that the borrower is able and prepared to qualify for both the construction loan and the long term take out mortgage at the same time.

For the most part, banks don’t do construction loans unless they can get the long term mortgage asset as they are otherwise not interested in the risk associated with construction projects.

If a self builder can’t qualify for both construction financing and take out loan through their bank or similar institution, then they can apply for a new home construction loan via a private lender.

This can also be a benefit in that the private may be able to provide a higher loan to value ratio than the bank and the private lender may not require you to have the take out mortgage in place before construction begins, giving you more time to shop around for the best deal.

If you’re a builder, developer, or property owner looking to do a self build project for a new home, give me a call so I can quickly assess your requirement and provide relevant new home construction loan options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“Regardless of The Type or Size of The Construction Project, One of the Crucial Elements For Success Is the Predictability of Your Construction Loan Draws”

The project management goal for any construction project is to manage well those things you can control and minimize the risk of the things you can’t directly control.

When it comes to construction loan draw management, the most important aspects of this process is knowing how much money will be advanced towards incurred construction costs and at what time.

Even if you manage everything in the project to the letter, there can still be draw cut backs and draw advance delays that are completely beyond your control and are more a function of the lender and how they administer the mortgage commitment.

If you choose an institutional lender, you may want to secure a contingency allowance incremental to the construction mortgage commitment from another lending  source or your own resources to project yourself from lender draw reductions which are not uncommon with institutional construction loans.

Another way to minimize draw risk is to select a private mortgage construction lender in situations where you can qualify for either an institutional or private mortgage construction loan.  Roughly 90% of construction loans are provided by private mortgage lenders anyway, partially due to the builder’s desire to secure a more predictable construction draw process, but mostly because institutional lenders are not interested in the risk associated with construction financing unless they are going to get a long term take out mortgage.

Its going to cost more money in terms of interest costs and lender fees for a private construction mortgage, but the draw process on average is more straight forward and more dependable in terms of what money will be advanced and when.

At the same time, with the renewed growth in construction projects and more private lenders entering the market, you also have to be selective when choosing private lenders if at all possible.

For some projects, depending on their type and location, the private lending sources may not be easy to come by and can result in you working with a lender that you perhaps don’t have any previous experience with and that also don’t have much of a track record in the market.

And with bigger projects where the draw amounts tend to be larger, privates can create delays with advancing money as they move their own money around to cover all the projects they are funding at any one time.

So the second risk management measure to reduce the negative impacts that can be associated with construction loan draws is lender selection. Make sure you spend some time initially with a new private lending source to make sure you’re completely comfortable with the way they come across and present their business. If you can’t get comfortable, its likely a sign of things to come. Also, make sure to do some background and reference checking where possible to see what others have experienced with respect to lender service and draw advancement.

Remember that private lenders in many cases are just one individual or a small group of individuals that are putting their money into construction projects and each individual or group will have their own way of doing things which can be good and bad for their customers.

Even before lender selection is broker selection as most private mortgage lenders place their money through a mortgage broker. So having an experienced construction mortgage broker working for you that has a pre-existing relationship with the construction mortgage lender provides you with another resource to help work through and follow up on draw management issues as well.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“Here Are The Most Common Draw Requirements That Need To Be Covered Off Before A Lender Will Advance Funds Against a Construction Mortgage”

Once the construction mortgage has been approved and registered against the project, there are a few more things required by most lender prior to advancing funds to cover construction draw requests made by the borrower.

The number of draws overall will vary with the type of project, but typically a residential home build will be structured to have 4 separate draws at the following stages of construction completion:

• Foundation in Place.

• Building structure completely closed in and secured (locked up).

• Drywall stage is finished.

• Overall Project Has Been Completed.

The lien act requires that hold backs be deducted from each draw. The typical legislative amount is 10%, but lenders can require higher amounts for their own programs above what may be required by law. The hold back amounts will be held in trust with the borrower’s lawyer.

All costs related to the overall draw management process including legal fees and appraisal fees are at the expense and responsibility of the borrower.

For non institutionally based construction mortgages, the hold back allowance will typically be paid out 45 days after completion if there have been no liens registered against the project. For institutionally based construction mortgages, most lenders will only advance the hold back portion in the form of a long term take out mortgage.

The first advance against the construction mortgage cannot occur until the following items are in place.

First, the borrower will need to provide a completed survey of the property clearly indicating where the new building will be sitting within the boundaries of the property. An alternative to an actual survey would be a title insurance policy for the property in question.

If the property is not connected to a municipal water source, the property owner will need to provide certificates for both water potability and septic prior to the first draw being advanced. If at the time of the first draw this condition is not met, the lender may elect to retain a further $5,000 to $10,000 from the draw advance until the condition is covered off.

To assess the borrower’s required equity in the project in the form of investment against costs incurred to date, the construction lender will either perform their own inspection of the work completed or hire an outside appraiser to complete an assessment of the work completed and remaining prior to the first draw being approved and advanced.

When all of these requirements have been met, the first draw will be approved and advanced to allow the property owner or borrower to pay off the outstanding costs incurred to that point in the project.

For more information on draw requirements, I suggest that you give me a call and I will make sure you get all your questions answered.

Click Here To Speak With Construction Mortgage Broker Joe Walsh.

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

“Here Is a Typical Construction Draw Schedule For a Residential Home Construction Project”

For most residential construction loans, the lender will agree to providing 4 separate loan advances or construction draws to cover off the cost of construction at specific points of completion.

• The first advance typically occurs after the foundation is completed which, on average, represents 15% of the total construction costs for the project. This is also referred to as the sub floor stage where excavation, foundation, and sub floor are all completed.

• The second advance is issued at what we call the lock up stage of the project where the walls, roof, windows and doors are in place and the project is completely closed up. This typically represents 40% complete.

• The third advance is issued at the drywall stage where all interior walls on the main floors have been installed and this represents approximately 70% complete.

• The fourth advance takes place at completion (98% to 100% complete). For larger projects, its not uncommon to see the draw schedule expand to 5 or 6 total advances to allow for better cash flow management.

Keep in mind that at all stages, the lender will only be prepared to cover off hard costs, and any soft costs incurred are deemed to be the responsibility of the borrower and are viewed by the lender as part of the borrower’s equity in the project.

Before the first draw is advanced, it is required that the borrower have clear title of the property, or in some cases a very small mortgage can still be in place. The construction mortgage will then be registered against the property, and the underlying equity in the property will further cover off the borrower’s equity requirement for the construction financing facility. If there isn’t sufficient equity in the property to meet the borrower’s requirement, the first draw advance will be reduced to allow for additional borrower investment in the project prior to the first draw advance.

For more information on how a loan advance process can be structured for your construction project, please give me a call and we can go through it together.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“If You Are Able To Qualify For Any Type Of Construction Financing, Do You Choose A Construction Mortgage Based On Cost Or Complexity?”

In a world where time is money, someone looking to finance a construction project needs to take that sentiment to heart.

The nature of construction projects is that they come with a certain level of risk where things can go wrong and they can become a time consuming to properly manage.

When it comes to construction mortgage financing, the same things are true. What also is true is that similar to all forms of financing, lower cost, means lower risk. In order for lenders to provide low rates for a construction mortgage, they are going to place requirements and qualifications in place that will assure them of a low risk lending scenario.

This is where the cost trade off for borrowers comes in.

Lower cost construction financing in most cases is going to be more work and more headache to deal with all the terms and conditions and their sometimes  seemingly unpredictable application to your project. There is nothing wrong with low cost deal. In fact I’ve never met anyone that doesn’t prefer it. But it does come with strings and each borrower who can afford to do so needs to decided if the added time and potential other costs that can come with it will be cheaper overall then selecting a construction mortgage with a higher interest rate but greater ease of use or convenience.

Its not uncommon for borrowers to find this hard to understand as after all many times their collective financing experience is based on buying a house, leasing a card, securing a credit line, applying for a credit card, and none of these are all that difficult to get if you have a strong financial profile and good credit.

But getting approved is only the first part. Meeting the conditions of the loan or mortgage are yet another. And when it comes to something like a construction project, the requirements and conditions can be very difficult to meet in some cases.

This is one of the reasons why private mortgage lenders provide a large majority of the construction loans issued on an annual basis across the province of Ontario.

Yes, private mortgages come with higher interest rates, but on average are approved much faster, provide a higher percentage of the construction costs, and have much more predictable and manageable draw schedules.

One form of construction mortgage financing is not necessarily better or worse than another. But to strictly be fixated on the interest rate may cause you to end up with a higher cost construction financing solution once you factor in all related costs, including the opportunity cost of your time.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Construction Mortgages – Cost Versus Complexity first appeared on Ontario Construction Loans And Mortgage Financing.

“Construction Mortgage Lenders Are Typically Interested In the Following Application Items When Considering Either A Residential Or Commercial Construction Loan Application.”

If you’re getting ready to apply for construction financing, the following is an outline of the most common information that is typically included in an application for financing.

While this is not meant to be an exhaustive list, it does provide a solid overview of the information you’re going to need to put together in order to get a construction mortgage commitment in a timely fashion.

Further, I have compiled the list so that it is directly relevant to both a residential and commercial construction project.

• Application Form Information. Like any other type of financing you may apply for, you will need to complete the lender’s application form providing pertinent information regarding your own identity, business description if applicable, and the personal net worth of the applicants. While you will likely be using a lender’s forms for this purpose, you can still be prepared in advance by creating an up to date personal net worth statement, business registration or incorporation dates, bank and trade references, and so on.

• Construction Plan. Each project is going to have a basic plan of attack and project overview that outlines the project being completed, who will be doing the building (turn key builder, general contractor, self build), and the basic costs and time lines, etc.

• Permits, Plans, and Drawings. One way to get a lenders immediate attention and speed up the construction financing process considerably is to have all the paper work in order in terms of drawing, plans, and permits. This group of documents will not only clearly show a lender what’s being built, but that you have the approval to build it.

• Building Budget. A well documented project budget generates a lot of confidence the accuracy of the cost projections as well as your ability to put together a project plan that isn’t likely to be compromised by a bunch of missing items that need to be added in later. Budget summaries should be will supported by written quotes and contracts for the work and material lined up in order to further build on their accuracy.

• Construction Time Line. Each task or action within the project, and the related cost of each as well as the timing for cost repayment should be organized into a construction project time line. Within this one picture, the whole project can be summarized in terms of activities, timing, and costs. The more detailed the time line, easier the project management will likely be as there will be very little if any guess work as to what needs to be done when and for how much.

Lenders may ask for additional information specific to an individual project, but for the most part, the above list will represent the 80/20 of a construction loan application.

To get help putting your application together and presenting to the most relevant lenders, give me a call and we can go through everything together.

Click Here To Speak With Construction Mortgage Broker Joe Walsh.

The post Application Requirements For Construction Loans first appeared on Ontario Construction Loans And Mortgage Financing.

“Once You Have Your Construction Mortgage In Place, The Next Big Financial Challenge Is Managing The Draw Schedule”

For most construction projects there are typically 4 draws where money is advanced against the construction mortgage approval to pay for construction costs incurred to the defined draw point.  The number of draws can vary for type of project, but for residential projects as an example, 4 draws are most typical.

While everything tends to be well laid out prior to construction commencing as to what needs to be completed for each draw, what happens in reality when you get to each draw request can be quite different from the plan.

This is especially true of institutional construction loans where the draw amounts need to be approved once the mortgage lender reviews the completion report provided by a third party appraiser. The role of the appraiser is to assess the remaining amount of work needed to complete the project and in many cases tend to be more conservative than what is actually required. The result of an overly conservative appraisal will likely see the lender reduce the draw request to make sure there are sufficient funds available to complete the project.

If a draw reduction occurs, the project is now put into a position of having to come up with another source of cash to get everything paid up to date and keep the overall project on track.

This is one of the potential challenges with any type of construction loan, but more common in the case of those issued by an institutional or traditional lender.

With private lenders, draws can also be cut back, but this is more likely to occur when required work elements defined for a particular draw are not completed. Private lenders don’t tend to perform cost assessments on the remaining work and are more concerned on the work done to date as compared to the building plan and time line they agreed to fund for each draw at the time of construction loan approval.

Another draw management challenge is the amount of hold back and eventual hold back payment. While the required hold back amount is 10%, institutional lenders tend to hold back as much as 15% of the total project costs. And at the end of the project when the hold back period is completed, the only way to get access to the hold back portion is through a long term take out mortgage with the same lender.

Private lenders tend to stick to the 10% hold back amount and will typically disburse the hold back at the end of the project when the hold back period has passed without any claims being made against the project.

There are other draw management issues to consider as well, making it one of the more challenging and potentially nerve racking aspects of construction project management.

For more information on how to effectively manage construction mortgage draws, click here to speak directly with construction mortgage broker Joe Walsh

The post Construction Mortgage Draw Management Challenges first appeared on Ontario Construction Loans And Mortgage Financing.