These types of commercial mortgages come in three different categories. There are bigger financial institutions like banks as well as smaller ones like credit unions and finally specialized construction lenders that supply loans.

Overall, the bigger institutions offer lower rates but their products are less flexible. The specialized construction lenders are the most flexible of the bunch with high interest rates.

Buy The Lot

Regardless of the financial institution you finally choose, most of them will require that you buy the lot with your own funds. After that, they will finance around 75% of the total cost of the construction loans. This can make it difficult for individual homeowners because they need a lot of cash upfront.

However, it’s possible to get credit used to finance 50% of the lot value. Specific institutions often finance 80% of the construction cost and or 80% of what is considered to be the future value.

Pay Structures and Interest Rates

For these types of construction loans in Toronto interest rates can vary quite a bit. With the bigger banks, the rates can be low but there are usually not very many fees involved.

Credit unions on the other hand can often offer monthly interest-only payments during the construction process. Be aware there is usually a fee that can come up to around .85% of any future funding amounts.

Specialized construction lending companies allow you to make interest-only payments and then deduct them from the next financing draw. This is to your advantage because you don’t need to pull money out of your pocket to continue the process.

Get in touch with us today if you have questions about construction loans in Toronto.

The post The Beginners Guide to Construction Loans in Toronto appeared first on OMJ Mortgage.

An informed customer is our best client. That’s why we’ve put together this beginner’s guide for these types of loans.

A construction loan is specific. This type of financing gets used for different reasons including:

• Building on a newly purchased parcel of land.
• Renovating or building a custom home.
• Building a commercial project like an industrial plaza or a medical building.

There are a few other things that you should know. For example, one of these loans will not give you the total value of the mortgage upfront. You’ll need to achieve specific milestones as the project moves along to receive more money.

The rates for these loans are generally higher than with more traditional mortgages. These are also called draw mortgages. The lender provides financing during certain milestones. The money gets used to pay for supplies and contractors.

Some lenders will give the funds to your lawyer who then disperses them to contractors. Other financial institutions might decide to deal directly with the contractor. Keep in mind that you’ll need to have a budget and or construction plan.

Construction costs can vary depending on the type of home or building you want.

For example, in Toronto, the general cost per square foot is $115-$900. The average home size in that city is 2,380 ft.². That means the total building costs can be anywhere from $273, 700 to $2142,000.

OMJ Mortgage Capital specializes in custom home construction loans across the GTA. Some of the advantages of using our services include the fact we deal directly with an institution’s decision-makers. What’s more, our fees and rates are always industry competitive.

The post The Beginner’s Guide To Construction Loans appeared first on OMJ Mortgage.

Here are some of the factors that we look at to make the best decision for you.

The Size of The Construction Loans in Toronto

It’s important to find the percentage of each project that a lender is willing to finance. It helps your business to determine whether you should think about diversifying and having relationships with more than one institution.

 Flexibility 

All business people understand that their plans can go awry unexpectedly. It’s important to know what happens if you can’t make scheduled repayments. You want to find out if you can suspend any principal payments ahead of a crisis and not during one.

We navigate construction loans in Toronto with varying terms from different lending institutions. Important information can be buried in the fine print.

It’s vital to find the right account managers that deal specifically with your business or loan.

We look after all the details for you including the guarantees that are being required from the lending institution in case of default.

Financial Reporting Obligations

It’s also important to know about the financial reports and statements you’ll need to provide. These need to be presented annually. For smaller loans, the requirements are usually less demanding.

Construction loans in Toronto quite often come with different covenants as well.  The bank can then demand all of the money back right away if you break even one.

It’s vital to consider how much and when to borrow. We can help. Get In touch today.

The post Some Boxes We Check for Choosing Construction Loans in Toronto. appeared first on OMJ Mortgage.