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Financing the construction of residential projects and condominiums

A Mortgage Planners commercial broker is the direct link between financing the construction of your residential buildings or condominiums and the creditor. Thanks to our professional experience and our overall knowledge of the commercial mortgage market, we are familiar with the various services offered by financial institutions and are knowledgeable about the services that are best suited to your needs, including the best available financing terms and conditions.

At the outset, the construction of a rental property may be financed through CMHC. During construction, the property may be conventionally insured then subsequently insured by CMHC. Financing is then completely disbursed once all the units are rented out. Construction financing is gradually disbursed, according to the progress of the work and the work is analyzed on a progressive basis by a cost consultant. The lender must ensure that there are sufficient undisbursed funds remaining at all times to allow for the project to be fully completed.

As a general rule, the lender finances up to 75% of the total project costs during construction. Then, if the loan is CMHC-insured, the institution may go up to 85% of the estimated value of the project, according to CMHC’s financing conditions.

When financing the construction of condominiums, usually 75% of the total project costs are covered by a loan. Financing is gradually disbursed, depending on the progress of the project. As a condition for disbursing the loan, the lender generally requires that the pre-sales represent at least 50% of the borrowers' revenue from all unit sales. Some lenders allow for a second mezzanine loan that does not exceed 10% of the total project costs secured on title.

The main criteria for a residential construction loan, whether it be a rental property or condominiums, remains the same with a few variations (in the case of a rental property, GST and QST are applicable to project costs) ::
  • Market research
  • Project cost details (land, construction, incidental and financial expenses)
  • Detailed rental or sales forecasts
  • Marketing plan
  • Calculation of project performance and rental performance or estimate of the rental property's value upon completion
Save time, energy and money and most importantly, optimize your financing by entrusting your property with a commercial mortgage broker.

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