Commercial lending, Toronto mortgage financing, and other areas of the loan world may sound like another language to you when you are starting to look for funds to build a home. Finding a perfect house can be challenging, so many people will look for a construction mortgage in Toronto to build a house from scratch that gives them everything they want. However, where do you start?
What is a Construction Loans Mortgage?
Construction loans are short-term loans that help cover costs for building a custom home. After the home is built, the potential occupant will have to apply for a mortgage to help cover the funds to pay for the completed property.
Q: Are higher qualifications necessary for construction loans?
A: Yes. With a construction mortgage in Toronto, you will often have higher standards for qualifications when it comes to down payments and credit requirements. Some cases may call for a 20% minimum down payment, but 25% is also not uncommon. You may also see that there will be a credit rating requirement of a minimum of 620 to qualify. This happens because construction loans will be riskier than traditional residential loans. Once lenders see more risk, they will look for more money and qualification requirements.
Q: Could excess funds get used for furnishings?
A: While it is a nice thought, borrowers will not have access to any funds available with a construction loan. These funds get paid directly to builders. If there ends up being any money left once the construction costs are covered, you are unable to touch that as well. The contractor will only get payment for work they perform, and the borrower will only pay interest on whatever gets paid out. You can save money when construction costs come in less than the original loan amount.
Q: Will the loan help cover the design phases of home construction?
A: This is another no. Any prospective builder for a custom home will have to finance all of the design elements for the home-building contract. Before you can take out your construction loan, you will have to show a builder's contract as well as designs, a construction timetable, and a realistic budget. Everything will need to get done before you can go into the loan application process.
The good news is that a construction mortgage is a great way for you to make your dream home a reality. If it doesn't seem as though your dream home is already on the market, you can start the process of building exactly what you want down to the finest details. This is the time for you to have a custom home that you can call your own for your family and generations to come. All it takes is working with the right lender and design team to bring everything into reality.
Do you want to find out more about getting a construction mortgage in Toronto? We are here to help with construction loans for all purposes. Contact the team at Diane Bertolin for commercial mortgages, construction financing, and land development loans by calling (289) 337-8492 for details.