Construction loans are essential in financing large construction projects, including the construction of residential and commercial buildings. In Ontario, these loans work differently from conventional loans, and it’s crucial to understand how they work to make an informed decision.
When seeking a construction loan in Ontario, it’s essential to have a detailed construction plan and budget that includes all project costs, such as labor, materials, permits, and any other fees. The lender will use this information to determine the loan amount and set up a draw schedule to release funds at specific stages of the project.
The draw schedule typically includes four or five phases, with each phase’s completion requiring an inspection from a professional inspector. The inspector will then prepare a report for the lender, detailing the progress made, and release funds for the next phase. This process continues until the project is completed, and the final draw is released.
In Ontario, construction loans typically have a higher interest rate than traditional mortgages. However, the borrower only pays interest on the amount drawn at each stage, not the entire loan amount. This feature helps to minimize interest costs and improve cash flow during the construction period.
It’s also worth noting that construction loans in Ontario may require a larger down payment than conventional loans. Additionally, the lender may require collateral to secure the loan, such as the property or other assets.
Navigating the world of construction loans can be complex, but Falcon Law PC is here to help. As the best construction financing lawyer in Ontario, we offer our clients free consultations to help them understand the legalities involved in securing a construction loan. Contact us at 1-877-892-7778 or firstname.lastname@example.org to schedule a consultation today.