A construction to permanent mortgage loan is a very common form of financing at the end of a construction project where the completed building is going to be retained long term by either the property owner or a buyer.

In cases of a self build, there is typically a construction loan that covers off the cost of construction, followed by a construction take out mortgage or permanent loan that pays out the construction loan and any other charges against the property in favor of a long term residential or commercial mortgage, depending on the property type.

When the builder, developer, or property owner are building something for resale, the construction to permanent mortgage will be acquired by the buyer and will be used to purchase the property.

The large majority of cases where construction to permanent mortgage are required are residential builds where the property owner is responsible for both the construction loan and the long term take out mortgage.

In these situations, there are two basic approaches to securing a long term permanent mortgage.

The first approach is where the construction loan is provided by a bank or institutional lender who will also require that the borrower apply and be approved for a take out mortgage with them, prior to any construction draws being issued.

This is a somewhat restrictive process in that you are limited to the programs, rates, and terms that your source of construction financing is prepared to offer you which may or may not be the best available in the market.

The second approach is to use a private mortgage lender to provide the construction loan and then go to an institutional lender of your own choosing to secure the construction to permanent mortgage.

Under this approach, there can be a number of potential benefits available to you. First, you don’t have to get financing done before the construction project even begins, giving you some time to look around the market for a residential mortgage program that best fits your needs. Second, you are not locked into one lenders programs, providing more potential choices for your long term mortgage requirements. Third, its not uncommon that you can get a better permanent loan commitment once the construction project is completed or near completed. With the risk of construction removed, the lender may be willing to be more aggressive on rates and terms to get your business.

One of the most important aspects of the construction to permanent mortgage process is that you have your long term funding arranged and ready to go when required.

If there are delays in getting this in place, you may incur additional costs on the construction financing side (which tend to be at higher rates), or other types of penalties for either not paying out the construction lender on time or not having funds available to pay for the last of the construction costs.

If you require a construction to permanent mortgage for your current project or one you’re planning, I recommend that you give me a call so that we can discuss your requirements together and go over different options available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh For Your Construction To Permanent Mortgage Requirements.

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

“Construction Take Out Mortgages For Builders or Buyers Are Not Always Available For Your Project”

It can be a crazy world out there.

Everyone can have their own interesting slant on what to build or what will sell in the world of construction. And some of the more creative designs and concepts have been known to be very lucrative.

But if you have a non conventional project in mind, and you happen to be able to secure a construction loan to build it, don’t be surprised if a construction take out mortgage may be difficult or impossible to get.

It’s the whole beauty in the eye thing sometimes when it comes to some of the projects that get completed. The problem though is that if a long term lender doesn’t believe there is a market for the more unusual, then you could be left scrambling, trying to pay out the construction loan before the lender ends up being the owner of your property.

One of the more common situations where this can become a problem is on an acreage or large lot where more than one building gets created, each with potentially different uses. From the builders point of view, this may be very practical and economical on a lot of levels, but from a take out mortgage lender point of view, the property and one of the buildings will likely be assessed for market value with the other non related building being completed ignored, regardless of its condition and functionality.

That’s why its always a good idea to at least scope out the market for a take out mortgage before the project commences even if one is not required at the beginning of the project by the construction mortgage lender.

Checking out the long term mortgage market is also an important exercise if you are planning to sell the completed project and property as it will give you a sense of whether or not your prospective buyer will be able to secure the long term mortgage required to complete the sale.

Mortgage lenders have definitely become more selective lately, so it would be considered wise these days to not leave long term financing up to chance later on in the project as you never know if and when a commitment may be forthcoming for funding to pay out the construction loan.

Click Here To Speak to Construction Mortgage Broker Joe Walsh

The post Make Sure Your Construction Loan Can Be Retired first appeared on Ontario Construction Loans And Mortgage Financing.

“For Owner Built Residential Construction Projects in 2010, Make Sure You Get Your Take Out Mortgage Secured Early On In The Project”

The current mortgage market is continually changing the way we need to approach getting construction take out mortgages in place.

With most of the construction financing provided by private mortgages, there typically can be a fair amount of time to shop the market for the best long term mortgage deal as many private lenders don’t require you to have the take out in place at time of construction, especially if you’re in well established residential market areas.

But that line of thinking is quickly changing as the mortgage rates start to inch up and are expected to increase over the short term. Waiting until the end of the project to get the take out mortgage in place could end up costing you more in the longer term if rates move against you.

So it makes more sense to spend the time at the beginning of the project to try and get both the construction loan and the long term construction take out mortgage arranged at the same time.

Even if you don’t have time to get all the details of a long term mortgage figured out right now, you can at least make an application and get a rate secured for the next 120 days. If you can complete the project by that time, then you will have at least one solid option to consider if rates move higher in the interim period.

Typically, the construction mortgage is the more difficult of the two mortgages to be approved for anyway, so if you’ve gone through all the work to prepare your construction budgets, get a post construction appraisal completed, and assembled the basic application, you might as well go the extra step right now and apply for the take out mortgage as well.

If your project is starting right away and you’re pressed for time to shop around for the rates and terms you’re looking for, then take advantage of the services of a mortgage broker to do most of the work for you.

That way, you don’t have to compromise your project management time while still being able to get the long term mortgage arranged as soon as possible.

If you have a construction project you’re about to start or are in the middle of that will require a take out mortgage, please give me a call so I can quickly assess your requirements and provide relevant options that we can go through together.

Click Here To Speak With Mortgage Broker Joe Walsh

The post Self Builders Should Be Arranging Construction Take Out Mortgages Earlier first appeared on Ontario Construction Loans And Mortgage Financing.

“Have You Arranged A Take Out Mortgage For your Construction Project Yet?”

In almost all cases, construction projects will require at least a construction building loan and a long term take out mortgage.

The construction loan for building is the primary form of construction financing most builders, property owners, or buyers are focused on when planning out their projects. But the take out mortgage at the end of the project is equally important to the overall success if the property is going to be retained by the owners after construction is complete.

For sake of greater clarity, when we speak of a construction take out mortgage, we are referring to a long term residential or commercial property mortgage that will be used to repay the construction loan and likely any other mortgages registered against the subject property. This mortgage will end up being the primary mortgage for the property and will likely be amortized for 25 years or longer, depending on the type of property and the repayment plans of the owners.

With institutional lenders, the construction loan and the take out mortgage are arranged at the same time and in fact the only reason the construction financing is provided in the first place is so the institutional lender can acquire the more valuable long term mortgage for the property.

With private lenders, which provide a very high percentage of construction loans in Ontario, the requirements for having a take out loan approved at the time of construction is not always required, especially in strong urban markets where several long term mortgage lenders are going to be interested in the property.

But just because a take out mortgage is likely to be available doesn’t mean it will be secured in time to pay out the construction building loan. And when a delay occurs after construction is completed, the situation can become quite serious in terms of the incremental costs that may be incurred and the potential risk to the owner’s equity in the project if long term financing is significantly delayed.

Here are some things to consider when you don’t get the take out mortgage arranged before construction begins.

• First, you’re going to have to spend time during construction to hunt around for a take out loan, which is going to take time away from project management. If you’re too busy with the project on a day to day basis, you’re likely going to end up continually putting the long term mortgage hunting off, creating a growing risk that it won’t be available in time.

• Second, when there is a delay, you’re going to be paying the higher rate of interest on the construction loan versus a long term mortgage rate.

• Third, if the take out process takes too long, the construction lender may demand payment, causing you to potentially accept a sub optimal long term mortgage if that’s all that can be secured in the time you have now to work with.

• Fourth, and even less favorable, is dealing with a legal procedure brought on by the lender to get the construction loan repaid which could see you lose both control and equity in the property.

When the project is a single family residential home, the prospects of getting a timely long term mortgage after construction starts is going to be very high. But when you get into bigger, more complex projects, especially ones that are not in highly active markets for the related property, the take out mortgage process can be more difficult and time consuming than you might otherwise think.

But regardless of your situation, its always good to get things arranged sooner than later and avoid any additional costs or time pressures can can arise at the end of the project when the take out mortgage is not yet secured.

If you have a construction project in the works or are in immediate need of a take out mortgage for your residential or commercial project, please give me a call so I can quickly assess your situation and provide relevant options for your consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Don’t Delay In Arranging Ontario Construction Take Out Mortgages first appeared on Ontario Construction Loans And Mortgage Financing.