site development loans | Ontario Construction Loans And Mortgage Financing

Financing Residential Subdivision Construction

Joe Walsh — Tue, 15 Oct 2013 14:54:38 +0000

“Financing Available For Residential Subdivision Construction And Development”

Financing is available for all stages of Residential subdivision construction including land acquisition, site planning, site development, vertical construction, and construction bridge loans when cash flow runs short in the middle of development stage.

One of the keys to any successful residential subdivision project is making sure that cash is available as required through out the project so that there are no project delays or slow downs that can generate additional costs or cause the project to stall out completely.

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One of the challenges with achieving a seamless cash flow during construction and site development is matching the funds required a particular stage with a financing source that can provide funding for the work done to date and the market value inherit in the property.

It’s not uncommon that each stage of financing can require a different construction loan which can come from a different lending individual or entity.

For instance, the first form of construction and development financing may be for the acquisition of the land itself from which the subdivision will be formed. A land loan will likely fall in the 50% to 60% loan to value range and will provide capital strictly related to the purchase.

Once acquired, the developer is going to start putting their own funds into the project. As the project increases in value, additional capital can be borrowed against the increase in equity.

There are also times when the financing targeted for a certain stage cannot be accessed until certain milestones can be reached which can be a real problem if the project no longer has sufficient cash to get to the next milestone.

An example of this would be during the period between acquisition and subdivision development approval. Once the property has become shovel ready with respect to approval of the project by the local municipality and the developer having all relevant permits, zoning, and studies in place to supply the approval, the property is likely going to be appraised for considerably more value than at the time of acquisition.

But in order to leverage the value created by project approvals, the approvals need to be in place. When you have 80% of the work done to get the approvals in place, there is not necessarily a recognition on the part of lenders that the property has yet gone up in value from a lending security perspective as the approval milestone has not yet been achieved.

In these situations, a developer may turn to a shorter term financing solution which could also be categorized as a construction bridge loan where a development based lender will consider the work done to date to some degree. For instance, a more specialized lender may not accept that the property value has increased yet, but because of recognition of the work done, they may decide to provide a second mortgage against the property to a higher loan to value. Where the first mortgage may have been issued at 50% loan to value, this short term bridge loan may be provided at 75% of the original purchase price, providing necessary capital to the project to allow it to get to the next key milestone.

Once the project is ready for site development and construction, the property will be reappraised and the existing debt refinanced into a larger development loan.

This is one example of many where alternative short term financing solutions may need to be inserted into the project to bridge any shortfalls in capital required to meet a key milestone required for future funding.

Regardless of the stage the subdivision project is at, we have financing solutions available for most situations and welcome the opportunity to assist in arranging debt financing throughout the project as required.

If you have a residential subdivision project that requires financing right now, or you’re just planning ahead and want to get a development or construction loan arranged, I suggest that you give me a call so we can quickly assess your situation and requirements, and discuss relevant options available to you.

Click Here To Speak With Ontario Construction Mortgage Broker Joe Walsh

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

Site Development Mortgage Financing

Joe Walsh — Fri, 18 Jun 2010 21:52:50 +0000

“There Are a Number of Ways To Arrange Site Development Mortgage Financing For Your Construction Project”

If you’ve got a project that is going to require site development mortgage financing for the next stage of development, here are some different strategies to consider.

Keep in mind that construction financing in many cases is funded by the building phase with potentially several different construction mortgages being in place and getting paid out from different lenders during the life of the project.

This is due to the fact that each stage of the project comes with different risks and different security re-marketing challenges in the event of lender foreclosure, so lenders that will finance the actual building construction may or may not have any interest in site development.

The key to any mortgage financing is the property or properties offered for security and the exit strategy for repaying the construction loan in the future.

The simplest form of site development mortgage financing is to place a first or second mortgage on a bare land piece of property that is just at the beginning of the development stage. If the property is zoned and permitted properly for the intended use and the overall project is well planned out with sources of capital available for the next stage, then a site development mortgage can be secured for from 50% to 75% of the value of the property, depending on location and type of project.

If there is insufficient equity in the property at the present time, then a secondary piece of property can be pledged as security. The property can be completely unrelated, but will likely need to be in a strong resale market to make it easier to attract interest. Depending on the amount required and location, lenders can take residential and commercial properties as additional security as well.

In situations where site development is partially complete and the builder or developer has invested significant funds to improve the property, the appraised value of the as is development can also be used to secure site development mortgage financing. The further the project is along, the more lender interest that will be available and the higher the loan to value construction mortgage lenders will consider.

If the construction project has resale units that have been pre-sold and is in the process of securing bank or institutional construction mortgage financing for the build out, a conventional lender may also consider providing a land advance to complete the site development if there is enough equity in the property.

This is likely going to be the cheapest form of site development mortgage financing as you’re leveraging the building phase construction application to get better rates for site development work.

If you have a construction project that requires site development mortgage financing, I suggest you give me a call and I will quickly assess your requirements and provide relevant construction mortgage financing options for discussion and review.

Click Here To Speak With Toronto Based Construction Mortgage Broker Joe Walsh

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

How Construction Development Mortages Are Structured

Joe Walsh — Thu, 06 May 2010 19:05:09 +0000

“Construction Development Loans Tend To Follow a Certain Pattern For Approving Financing, Advancing Capital and Mortgage Repayment”

Its not uncommon for a real estate developer to want to secure sufficient capital to complete the total project.

While this may be the desired result, it tends to be impractical from the view point of a construction mortgage lender unless there is a substantial amount of real estate security offered.

Construction development projects are, for the most part, funded by private mortgage lenders in the form of individuals or private mortgage corporations.

The focus of the construction mortgage lender is going to be on how much is the property worth in its current state, and how many units of the development are pre sold?

As an example, lets say a developer has purchased a piece of property for $2,000,000 and has sunk $1,000,000 into road access for the initial sites that will be sold. The entire project include 100+ lots for development, but the initial development loan will likely be for no more than 65% of the current property value, or in this case, say 65% of $3,000,000.

This financing reality will cause the developer to break the project down into phases to fit within the money being provided. To get the project going faster, its not uncommon for the developer to sell a portion of lots to other builders to increase the available capital for their own development efforts within the project.

Construction mortgage funding is then approved for the initial phase of construction and mortgage funds are advanced on a predetermined site development or lot build out schedule.

During the completion of Phase I, the mortgage is repaid as serviced lots are sold to other builders and completed living units are sold to consumers.

To start Phase II, the process basically repeats itself, based on a revised appraisal of the property remaining.

While developers would prefer to have a revolving line of credit that could be reused from one phase to the next, the private mortgage lenders tend to look at each phase independently. This means that for each new phase, the developer is going to have to pay a mortgage fee on closing of a new mortgage agreement for that particular phase as well as the monthly interest cost for the money that has been committed.

Depending on the lender, monthly interest charges can be based on funds being utilized or total funds committed, regardless if they have been advanced or not.

If you need assistance with a construction development financing requirement, I suggest you give me a call so we can review the requirements and go over the most relevant construction mortgage financing options available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post How Construction Development Mortages Are Structured first appeared on Ontario Construction Loans And Mortgage Financing.