Here are 3 common contruction loan scenarios:
1. Clients purchase land and build a house on the land, most of these clients own the land ( free & clear) and requested for a progress financing loan from the bank. The only challenge is that, progress financing can be expensive, as the bank requires the clients to get an appraisal done at every stage of the construction, ie : foundation, framing, etc. Some clients prefer to take out a private mortgage loan for the whole construction, ie: 6 months to 12 months time and refinance the house to payout the private loan when the construction is completed.
2. Clients would like to buy land and build a house on the land. This approach can be very expensive, as land financing is expensive because no banks entertain land financing, only private lenders or very small trust company may consider. In view of the Sub-prime mortgage credit crunch south of the border, it may be very difficult to get funding.
3. Clients would like to do extensive renovations, first of all, the clients have to let their bank know about this renovations if they have an existing mortgage, otherwise, the bank can demand immediate payout of the mortgage if they finds out. The first step is to get the floor plan / blue print approved by the city, then get 3 quotations from reputable renovators, present to the bank for refinancing or progress financing.
Please note that banks are tightening up on credit due to their exposure to the Sub-prime mortgage credit crunch in the States, and the real estate value is making a downward adjustments in some parts of the city at this time, it may be more difficult to do custom construction financing in 2009 versus early part of last year.
For more information on construction loan, please contact Anne Lok for further details.