Infill Construction Financing
In real estate markets in many of Canada’s largest urban centres infill construction financing has become a common request by many builders and investors. Even home owners consider infill construction financing for rebuilding their homes on the existing land they are living on.
In places like Toronto, Vancouver, Calgary, Montreal and the surrounding cities of these urban centres infill construction financing applications have become a normal and routine process in attaining the funds needed to start a residential construction project. It is pretty well the same with non-residential or commercial construction projects.
This is yet another important reason why a borrower, investor, and or builder should work with a Mortgage Broker as many of them have extensive experience in working with many lenders who provide infill construction financing.
For the most part infill construction refers to the process of getting money for financing the construction of a real estate project in which the applicant has or will be purchasing an existing property and the land it is on for the purposes of knocking it down to build a new property on it. At times infill construction financing also refers to the acquisition of raw land on which plans are in place to build residential or commercial property on it.
Infill Construction Financing requirements
- Each lending institution will have their own borrowing requirements, but some of these can be applied across the board with many if not all lenders.
- Minimum and maximum loan amounts
- Borrower qualification standards for income / employment
- Credit worthiness in the way of credit checks and its history and strength
- Past experience in home or commercial building projects
- Lending interest rates will vary based on each projects unique realities and other variables like, location, size, and funds required.
- Usually there is a lender and broker fee
- Appraisals will be required throughout the project to verify land and property value before and after infill construction project
- Sometimes even environmental tests must be done depending on the type of property and land currently on site
- With infill construction the lenders typically give up to 100% of the hard construction costs and up to 75-80% of the lot purchase price or appraised value
The above items should give you a good idea of what is involved with applying for infill construction financing. At Trustterra Mortgage we’re always here to help our clients attain the best possible mortgage financing options available to them based on their credit and income realities. If you have any questions or wish to start on a infill construction financing project Contact Us. We would be happy to help!
Pre-Construction Mortgage Approval
Have you ever purchased a pre-construction home? If you have, then you know how the financing works, but if you are a first time home buyer and looking at purchasing a pre-construction property, then you will want to read this post about pre-construction mortgage approval.
It is common practice and policy by the builders to ask potential home buyers to get a pre-construction mortgage approval to make sure they can be qualified if they were to buy the property right now, even though pre-construction projects normally take over one year to finish.
So what do first time home buyers do? They go to their Mortgage Broker and ask him or her to qualify them on a pre-construction mortgage approval. This is no different than a regular pre-approval. In fact they’re one and the same.
When you have a pre-construction mortgage approval you are showing the builder that if the home was available to be moved in as of now your mortgage was approved and the builder would get paid.
The cautionary tale here is the fact that pre-construction mortgage approvals a.k.a. have a maximum life span of 120 days after which point they expire and there is no guarantee from the lender they will honor the rate hold or anything else on the mortgage approval.
What typically happens with pre-construction mortgage approvals is that the home buyer will return back to their Mortgage Broker no earlier than four months before the actual and final closing date of their property and apply again for an actual mortgage approval. Because this time around the pre-construction project will have been completed and be ready for transfer of ownership to the purchaser in no more than 120 days.
In this second time of applying for the mortgage the process can be more strenuous as you will need to provide a whole lot of documentation to the lender to satisfy all their conditions of approving your mortgage. Here is a list of items that the lender will ask the applicant to provide; this is just an example:
- Updated mortgage application
- New credit check, which the Mortgage Broker will do
- Proof of income
- Proof of down payment
- Copy of the builders final and signed Agreement of Purchase and Sale including all schedules, waivers, amendments and any other documents that comes with the agreement
- Proof that you have at least 1.5% of the purchase price in your personal accounts to cover closing related costs such as legal fee, appraisal fee …etc.
This is why we always recommend that you consult with your Mortgage Broker and work with her or him closely along the path towards your final closing date and home ownership. We recommend that you also work with a Lawyer and even consider asking a Realtor to go through the builder’s documents for you as they can catch certain things that you may not to be able to better negotiate with the price.
We’re here to answer your questions. Contact Us with any questions you have, or if you would like to start your pre-construction mortgage approval application process.