“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.

“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.