Blog

Ensuring a Construction Mortgage Deal Goes to Plan

Blog-Date-1Sep 12, 2018

Depending on the focus of your business, not all mortgage brokers frequently come across clients seeking construction mortgage deals. The main difference between a typical residential and construction deal is that the lender will require specific information related to the planned build to properly assess and underwrite a construction mortgage.

To give you and your client the best shot at securing a mortgage approval, we’ve put together this overview of construction financing basics to show you what’s required – and to help you maximize the likelihood that your deal will go to plan.

Constructing a solid mortgage application

Building a house requires a lot of hardware and supplies. Similarly, building a construction mortgage deal requires a lot of detailed information.

To assess a construction financing application, we need to gain a full understanding of your client’s current situation and what they plan to build. We have many questions during our underwriting process, and we rely on you to work with your client to answer them as thoroughly as possible. Here are some of the details that we want to know about:

  • What are the property details?
    Where is the property located, how big is it and what condition is it in?
  • What is the building plan?
    Will your client be building the house themselves or hiring a contractor?
  • What are the project costs?
    Has your client costed out the entire project in detail, from materials to permits to insurance?
  • What is the post-build plan?
    Does your client intend to live in the house or sell it upon completion?

These are just a few of the many questions that we need your help to answer in order to assess your client’s mortgage application. In many cases, this requires documentation – for example, building plans and permits, cost quotations, and a property appraisal.

For a detailed framework to guide you through the construction financing process, download our Pillar Blueprint document.

pillar construction blueprint

Partnering with Pillar for a better build

As you can see, putting together a deal for construction financing from Pillar requires a bit of extra legwork upfront to gather all the necessary documentation. Is it worth the effort? We certainly think so.

Four reasons why we think it’s worth your while to apply for a construction mortgage from Pillar:

    1. We offer up to 80% LTV for mortgages anywhere in Ontario, including construction mortgages.
    2. We offer a flexible draw schedule with unlimited draws; in contrast, big banks typically follow a strict and inflexible four-draw schedule.
    3. We deduct your client’s payments from the next draw, whereas banks typically require payments to be made throughout the construction process.
    4. We work with you and your client to find flexible solutions when unexpected issues arise (e.g. delays involving city permits); big banks are more likely to simply pull the mortgage.

Getting the green light for construction

How quickly we can assess your application depends on many factors, including the time of year and whether you can provide all the necessary information from the get-go. If you submit a detailed application from the start, we can typically provide a response within 48 hours and an approval within 30 days, allowing your client to kick-start the building process without delay.

At Pillar, our underwriting process is thorough because we want every mortgage we finance to be a success. We are here to work with you and your client to get their dream home built.