The home construction loan terms you can receive can vary considerably from one bank or institutional lender to another.

These terms are further complicated by the fact that most banks and institutional lenders providing home construction loans also require you to quality for a take out mortgage with the same lender in order to get construction financing.

And while the types of terms are going to be very common from one lender to another, the specifics for any given term in a construction mortgage agreement can be significantly different.

Here’s a few examples of why this is important.

Length of Construction Draw Period. This represents the amount of time available to you to draw on the construction loan and can vary from 12 to 18 months among the primary institutional home construction lenders.

Take Out Mortgage Interest Rate Hold. While some lenders will provide a rate hold of up to one year on your long term take out mortgage that will be put into place at the end of the construction period, other lenders don’t provide any rate hold on the take out.

Mortgage Breakage Costs. If you choose at the end of the construction period to get the take out mortgage somewhere else, there will be a penalty associated with going elsewhere and the actual penalty and how its calculated can also vary considerably from one lender to another.

Debt Servicing.  While most construction loans will charge interest only payments during the construction period, there can be exceptions to this which can include other administration costs.  With cash flow an important part of the construction project to manage, this is an area that is clearly understood before finalizing a home construction loan agreement.

While these are some of the more potentially impactful terms and conditions, there will be several others  that you’re going to need to read through closely and make sure you understand them so that there are no issues or surprises down the road.

The best way to make sure you’re signing up for a home construction loan that makes sense for your project is to work with an experienced construction mortgage broker who can go through each lenders terms and conditions with you and help you arrive at the right decision.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“Waterdown New Home Construction Loans Are Available From Bank and Private Lending Sources”

Waterdown new home construction loans and mortgages are pretty common these days with all the different construction projects and developments going on in the area.

Most of the construction financing is being acquired by developers and builders completing property holdings for sale to the public. And for builders, property owners, or developers, we provide a variety of construction loan types including builder loans, land development mortgages, and construction bridge financing.

For the individual home owner looking for a Waterdown new home construction loan, there are also a number of options to choose from. Many people will first try to arrange construction financing through their own bank which is a logical first step. But if they fail to qualify, then a private mortgage construction loan is likely going to be the next most likely option.

Most people don’t realize that private mortgage construction financing is considerably larger than bank construction loan programs on the whole. This is due mostly to the fact that with a private construction mortgage for a new home build, the take out or long term mortgage that consolidates the construction and land costs at the end of the project does not typically need to be in place at the start of the project. In the case of a bank construction loan, both the construction financing and the take out mortgage must both be approved prior to the commencement of construction. This is because the bank or institutional lenders will only provide construction loans for new home builds if they can secure the longer term mortgage at the end of the process.

With private mortgage construction financing, the long term or take out mortgage can be sourced out after construction has begun in most cases, providing the property owners with more time and flexibility to locate the best deal available to them on the market.

Regardless of the type of lender you choose to go with (bank or private), it would be a good idea to work with a construction mortgage broker that can not only help you locate the best construction financing fit for your project, but also help you with both the application and loan administration process that goes with it.

If you are in need of a Waterdown new home construction loan, give me a call and we’ll go over your available options together.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post New Home Construction Loan 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.

“Here’s A Basic Outline of What You’re Going To Need To Apply For an Institutional Construction Mortgage For a Self Build Project”

With an institutional construction mortgage application, you are effectively applying for a construction loan and a long term take out mortgage at the same time.

For a straight construction loan where a take out mortgage is not a requirement of receiving a commitment, the focus is on the equity in the project. But with an institutional construction mortgage, the lender will determine mortgage eligibility of an individual application based on both equity investment and repayment assessment.

When applying for a self build home construction loan, here is the initial information that most lenders are going to want to see first.

• Designer Plans. Having a completed design or set of blueprints for a project provides a mortgage lender with not only an accurate outline of the project, but the amount of work gone into it and how close you are to actually starting construction.

• Contract With Builder or General Contractor. The construction mortgage provider is going to want to see that you are working with a reputable home builder and that their is a contract in place or drafted to be completed, including a quote for the scope of work they will perform for you.

• Deed of Land or Offer To Purchase. Construction loan applications will typically not be considered if you don’t have the subject property secured or have the ability to secure it through an accepted offer to purchase.

• Mortgage Application Form. The basic construction mortgage application form will outline the personal net worth of the applicants, a summary of their annual cash flow, and provide permission for the construction mortgage lender to conduct a credit check.

• Employment Confirmation. Because of the need to have the long term or take out mortgage approved at the same time, the applicant(s) also need to provide at least three years of earnings history supported by their Revenue Canada personal income tax notices of assessment and at two pieces of employment confirmation (T4 and a recent pay stub, or an employer letter and a recent pay stub).

There will likely be other information required, which can also very by the institutional construction financing source, but most will require the above items to begin considering your application for a construction mortgage.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh

The post Construction Mortgage Application Process For Self Builds first appeared on Ontario Construction Loans And Mortgage Financing.

“You May Be Surprised As To What The Biggest Risks To Self Build Construction Financing Actually Are”

Because most construction financing mortgage loans are from private lenders, the focus is more on property value versus annual earning and credit profiles.

So the largest risks associated with self build or home construction financing don’t really have anything to do with credit and repayment, but more about budgeting and project management.

That’s right, the budgeting and project management elements can pose a higher risk to the success of a construction project than just about anything else involved with a self build process.

And if you stop to think about it for a minute, the reasons are fairly obvious and logical.

First of all, lets define self build construction projects where the owner of the property is going to finance and coordinate the construction of a building structure on said property. In most cases, this is a residential home where the future home owner plays the role of borrower and general contractor. The property owner may also utilize a licensed builder, but the property is not owned by the builder.

In most cases, the self build will be the one and only such project ever undertaken by the property owner or owners in the case of husband and wife joint property ownership.

As a result, the individual or individuals have very little if any relevant experience for first making sure that all costs are accurately budgeted into the project and then being able to properly project manage the work to a successful completion, within the budget outlined.

In most cases, if there is a reasonable amount of project planning and some equity in the property, a construction loan will not likely be hard to procure. But once approved, there is certainly no guarantee that everything will progress according to plan and the ability to deal with cash flow and project management issues will be critical to not running out of money before completion and getting completed to the requirements of the long term take out mortgage.

Much of these risk can be taken away with a detailed budget that is fully supported by quotes and binding contracts between the self builder and the suppliers, contractor, trades, and sub trades. The budget needs to also allow for contingencies and stay away from unnecessary changes to the plan.

From a project management point of view, a detailed work plan arranged across a time line with costs associated for each element of work will go a long way to reducing the risks associated with this critical project component.

To better understand these and other project risk elements, please give me a call so we can make sure that whatever construction financing that gets arranged for your project is going to best suit the construction requirements.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Self Build Construction Financing Risks first appeared on Ontario Construction Loans And Mortgage Financing.