“Construction Financing Interest And Offers Can Vary Considerably By Type of Project And Location.”

If you’re an active builder and developer, working most in the same localized market, there is a good chance that your going to be fairly well in tuned with you construction financing sources of supply. If there are any subtle changes in money that’s available at a given time, or changes in costs and terms from the lenders prepared to fund your deals, its not likely going to come as a bit surprise to you.

But when you’re looking at various projects in other locales than what you normally work, or even in areas you’ve never had a construction project before, don’t automatically expect that all construction mortgage lenders are going to act in the same fashion towards opportunities in the market. This regional diversity among construction lenders can be seen in both bank and private lenders. Just because a bank, for example, is across Canada, certainly does not mean that their policies for granting construction loans are going to be the same every where they operate. There are likely going to be adjustments or criteria that best fits their risk assessment approach in the local market.

The same goes for private mortgage lenders. With private lenders, most of what can be different is going to be related to price and exit strategy on the property being considered. As opportunistic lenders, private mortgage providers are going to price to what the local market will bear and what the competition is offering. This is not an absolute rule, but in general the more remote the location where the construction project is going to take place, the higher the cost of financing is going to be and the tighter the terms and conditions of construction financing as well.

Needless to say, one of the most important parts of planning out a project in an area you have not previously done business in is to 1) develop an understanding of the lender supply for your specific type of construction project, and 2) make sure that the true all in cost of funds can be covered by your cash flow and still yield the profit you’re after.

If you’re looking for construction financing in Southwestern Ontario, I suggest you give me a call so I can quickly assess your requirements and provide relevant construction loan options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Construction Financing Can Vary By Region first appeared on Ontario Construction Loans And Mortgage Financing.

“Here Are Some Typical Interest Rate Ranges For Different Types of Construction Financing Mortgages”

Construction loans are basically provided from three mortgage lender classifications and three mortgage registration positions, each impacting the risk to the lender and rate to the borrower.

In terms of mortgage lender classification for construction loans, there are the major banks, secondary banks, and private lenders.

The major banks tend to own the institutional construction financing in larger centers for residential and commercial properties as they will finance these deals at 2 to 3 percent over the prime rate.

The secondary banks and credit unions will provide more construction financing in more rural or less prime market area where the major banks have less interest and will provide construction mortgages more in the prime plus 4% to 6% range.

The third category, which is also the largest category for construction loans, is private mortgage lenders. Private lenders will provide construction loans for 8% to 10% on both residential and commercial properties.

These rates, which can still vary outside of the ranges mentioned, are related to a first mortgage position on the property.

Institutional lenders do not typically provide construction mortgage financing in a second position on a property unless the first mortgage is very small in relation to the value of the property prior to construction. But when a construction loan is issued in a second position, the construction loan rate is going to go up by approximately 2% on average.

The same is true of private mortgage construction loans in that the higher the mortgage registration position, the higher the interest rate on the construction loan. And unlike institutional construction mortgages, many private construction loans are registered in a second position against the title of the property after the land or site acquisition mortgage. In some cases where the equity is high enough and the overall project considered to be well suited for a strong real estate market, the private mortgage lender may even consent to providing a construction loan registered in a third position on title.

Similar to the institutional construction financing requirements, a second mortgage position on a private construction mortgage will command an interest rate increase of approximately 2% from what would be offered in a first mortgage position and a construction mortgage provided in third security position may command an interest rate increase of 4% to 8% above what would be charged for a first mortgage registration against the subject property.

Remember that these are only general guidelines you can apply to get a feel for what certain lenders and mortgage registration positions will charge and that the actual rates will vary by lender and construction project.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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