I recently published forecast by the Construction Sector Council (CSC) shows considerable growth in Ontario based construction over the next 9 years in various parts of the province.

With the housing market leveling off in some areas, the majority of growth is expected to come from commercial, industrial, institutional, mining, and utilities projects.

Here’s the link to the full article … http://www.newswire.ca/en/releases/archive/May2011/24/c5996.html

The increased level of construction projects and spending is going to require increases in the pool of construction workers.

The construction industry as a whole is calling for 100,ooo new workers to enter the industry and receive training to cover off the estimated 27,000 new workers that will be required plus 73,000 new workers to replace retirements that are expected to occur over the next 8 years.

Much of the construction work outlined in the report is related to big projects around the project which of course are going to require construction financing for the most part.

So what does this mean for the small to medium sized construction projects that are also going to be seeking construction loans during the same period of time?

While its hard to have an accurate crystal ball, its likely that construction funding on average is going to be more available and more competitive that it is right now.

Larger projects from larger credit worthy borrowers are going to improve the financing portfolios of construction lenders, allowing them to diversity even further into smaller projects that may be considered higher risk due to borrower credit profile, industry, location, or some combination of these factors.

And because construction financing is a very lucrative form of mortgage financing, its going to attract more private money as well.

The real risk to smaller projects is likely not related to access to capital but more towards higher costs related to higher demands on the labor supply.

From a construction financing point of view, lots of larger projects are going to bring more profit potential into the market place which is going to attract more money to invest in construction.

If the CSC’s projections are accurate, the better part of the next decade is going to have a great deal of potential for those working in the Ontario construction industry and the rest of use working to get these projects funded properly for the respective owners, builders, and developers.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“The Supply of Ontario Construction Loans Is Always More Challenged In The Prime Building Season”

We are now into July of 2010 and the construction financing season is into full swing.

With construction starts growing month over month for the last several months, the number of projects under way will start to impact the available sources of construction financing in certain areas.

Remember that the majority of Ontario construction loans come from private mortgage lenders and this category of lender, unlike a bank or institutional mortgage provider, has more of a finite supply of capital available to fund construction projects at any given time.

And with private mortgage construction financing being more specific to region and project type, there is a greater chance than supply will start to get constrained in the summer months compared to other times in the year.

That being said, there is no risk of the market running out of Ontario construction financing. But in certain areas for specific projects, the supply can become periodically constrained creating more opportunistic pricing for lenders who are prepared to lend in those areas.

Similar to any commodity market, supply and demand will impact pricing and terms of sale or terms of financing in this case. As a result, you could end up paying higher rates than you need to if you can’t find better construction financing options in the time available.

To make sure that you get the construction loan you’re looking for, the best approach is to work with a Ontario construction mortgage broker who covers both your area and the type of project you’re working on. Mortgage brokers that are more focused on construction financing will have a larger supply of relevant private lenders than mortgage brokers that place the occasional construction mortgage loan.

Construction mortgage brokers will also tend to work with private lenders that cover a broader geography. So if your local construction financing sources dry up or start to jack up their pricing, private lenders from outside the immediate area may be your best option.

But to access them, you’re going to have to be working with a construction mortgage broker covering your area.

If you’ve got a construction project in Southwestern Ontario that your planning or in the middle of, I recommend that you give me a call so I can quickly assess your situation and provide relevant Ontario construction loan options for your consideration.

Click Here To Speak To Construction Mortgage Broker Joe Walsh

The post Ontario Construction Loans In High Demand first appeared on Ontario Construction Loans And Mortgage Financing.

“The Key To Most Construction Mortgage Approvals Is The Amount of Money and/or Equity You have Committed To The Deal”

A construction mortgage, especially one from a private lender, is less concerned about the long term viability of the project or even who’s going to be the owner at project end, and more concerned about the market valuation of the project and borrower or builder equity investment.

The construction mortgage down payment can be in the form of cash or other security offered as collateral to the project. The amount of borrower investment can vary considerably by project, location, and lender, especially when you’re looking at commercial construction loans.

At the most aggressive end of the spectrum, construction mortgage lenders will tend to want to see a solid equity investment of at least 20% of the project costs. If most of the investment needs to come from cash injected into the deal, the down payment against the property will have to be completed prior to the first draw being advanced. Under this scenario, the goal of the borrower is to complete the work required to get to the first draw on budget so that the lender will start to advance funds from that point forward.

When there is substantial equity in the construction property or there is other property offered as security, the construction lender may be prepared to advance funds to cover the initial costs of the project. In some cases, the lender may even go so far as to advance 100% of the construction costs if the equity in the secondary property security is large enough.

But without a strong equity position either in real estate pledged for security or cash invested in the project to date, its unlikely that a construction mortgage applicant will be able to secure a mortgage commitment or any advances against one that is approved.

With larger scale projects where the equity portion is not sufficient to secure enough construction loan funding, the borrower will look to mezzanine funding sources to provide the additional equity for a share in the return of the overall project.

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

Click Here To Speak To Construction Mortgage Broker Joe Walsh

The post Construction Mortgage Down Payments 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.

“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.

“Make Sure You Read All The Fine Print Before You Sign Back A Construction Mortgage Commitment”

Before you whip out a pen and sign on the dotted line on the sign back of your construction mortgage commitment, make sure that you have read through all the requirements, conditions, and mortgage program specifics.

Construction loans can have some very prickly rules that may not always be apparent on the surface, but can catch up with you later on in the project.  The mechanics of how any construction mortgage will be administeredshould be clearly understood before accepting any offered funding, even if everything appears to meet your requirements on the surface.

For instance, its almost impossible to meet the conditions of an institutional construction loan if there is an existing mortgage on the project. The equity ratios that are required to be in place at each draw stage can be next to impossible to satisfy based on the lender’s own commissioned third party appraisals.

Even when there isn’t a mortgage in place on the property, institutional draws can be reduced by the results of the third party appraiser who is focused on valuating the remaining work on the project. So even if you’ve completed everything outlined for a particular draw that was agreed to by the lender prior to construction starting, you can still get your draw cut back based on the manner in which they assess work completion outlined in your mortgage documents.

Most institutional lenders will take this type of approach. You are not going to be able to change it, but you’re going to need to be prepared to work with it if you sign up. And the only way to really work with it is to get absolutely everything done that is required for each draw stage, AND have a source of additional funds to draw on if the construction draw request gets cut back for any reason.

Other examples of things to pay close attention to in the mortgage documents would be costs that may not be covered, such as any form of sales taxes, and the manner in which the hold back process is managed in terms of the amount of hold back set aside and the requirements for paying out the hold back at the end of the project.

If you’ve starting the process for locating and securing construction financing, or are in the process of considering potential offers, give me a call so I can quickly assess your requirements and situation and then provide you with fully explained construction financing options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

“Qualifying For Builder Construction Loans Has a Lot To Do With The Exit Strategy For Completed Residential or Commercial Units”

Builder construction loans can be secured by either a commercial builder who plans to resell the completed project or a property owner who plans to be a post construction occupant.

But whether you’re a builder or property owner, the basic process for qualifying for construction financing is largely going to be very similar when we’re talking about building a residential home on a single lot.  The constructon loan provided will evaluate the equity in the property where construction will take place, any investments to be made by the borrower against the construction costs, and the third party appraisal of what the post construction project will be worth. From this assessment, the lender will determine the amount of financing that can be provided against the construction costs, and the amount of investment, if any, that will be required by the borrower prior to issuance of the first draw down against the approved mortgage funds available.

When there are multiple lots involved with a builder application for financing, the qualification process for a construction loan will be based to a large extent on the exit strategy the builder has for selling off completed units.

For instance, if the builder has 10 plus lots to build out, but plans to build only two units at a time, the construction financing would likely be based on the costs for those two individual projects.  When the builder gets the buildings sold, the construction loan account can be paid down and funds will then be available for additional builds.  Each time a lot is sold, it will be released from the mortgage security, so the remaining real estate value will have to be sufficient to cover the equity requirement of the construction loan facility, otherwise the builder will have to provide incremental capital as lots are released.

If the builder planned to build out ten lots at the same time, the lender may require that in addition to the construction loan requirements, that either a take out mortgage be arranged to pay out the construction loan, or that a certain number of presales be in place prior to loan disbursements being made.

Or, much like a property owner coordinating a self build, a commercial builder can arrange a construction loan for an individual lot and unit build that will be retired at the completion of construction by a long term take out mortgage, real estate sale, or inventory loan.

For commercial builders, the larger the construction request, the more the lender is going to focus on 1) builder investment and timing, 2) builder qualifications, and 3) the number of presold units or other relevant exit strategy.

Once a builder gets a number of projects completed while using a particular lender for building construction financing, there is a good chance that the lender’s comfort level will increase which can result in more favorable terms and higher borrowing levels on similar projects.

If you’re a commercial builder or owner working on a self build project and you’re seeking a construction loan for your project, I suggest that you give me a call so I can quickly assess your requirements and provide relevant construction mortgage options that we can go over together.

Commercial builders that develop a relationship with a construction lender over a series of projects may be able to secure better rates and terms over time that one off projects as the volume of repeat business and the predictability of the result will have a value to certain sources of construction financing.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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