Financing Services

Development Financing for Condominium Development Projects.

  Financing Available up to $600M   

Condominium Development

Condominium projects using condo construction financing are among the most popular class of commercial construction in Ontario. Such projects characteristically uphold tens of millions of dollars or even more depending on project location, along with supply and demand of the market.

Remember that condominium construction loans differ contingent on the nature of the project, and are consequently the most challenging commercial mortgages to obtain. As such, there is a limited quantity of mortgage lenders that successfully execute loans of this nature. Condo development or vertical development projects include but are not limited to, high-rise towers, low-rise buildings, row-townhouses, four or more-story apartment-style designs, multiplex projects as well as mixed-use developments for retail, office, or hotel use.

Condo construction loans possess a variety of variables that may be outside of the developer’s control. As such, there is a limited quantity of mortgage lenders that successfully execute loans of this nature. The most beneficial projects are developed by those that implement a development plan on time while simultaneously planning and moderating the amount of work involved.

The application process for condominium construction financing depends on the real estate development and intended use. The market has an already established fair market value in place for the project. This includes a present value, as well as a future value to date project completion.

We understand that this information can be hefty to digest and encourage you to contact us when planning your next condominium project in Ontario. This also pertains to those who are already in the midst of completing projects of this type, as we will never hesitate to evaluate your best options.

FAQs

To qualify for a loan for a condominium development, the condo must be in compliance with the Condominium Act and the loan amount must be relatively small compared to the total value of all units in the condo.

Yes, A majority of unit owners must vote in favor for a condominium corporation to be able to borrow money

No personal financial information is required from unit owners. The loan is to the condominium corporation, and individual unit owners will not be asked to provide any financial information

Typically, commercial finance interest rates are higher than those offered for mortgages on owner-occupied residences. This is why condominium development loans have higher interest rates than those for individual mortgages. These loans are not secured by a mortgage and charge.

At the end of the term, the condo corporation has three options for loan renewal:

  1. renew the loan at the existing principal balance and prevailing market conditions.
  2. pay down a portion of the loan and renew the remaining balance at current market rates, or (3) pay off the remaining principal balance in full.

The interest rate for the renewal of the loan will be determined by the loan market conditions in effect at that time.

The term of the loan, which is the length of time that the interest rate is fixed for, is typically discussed between the borrower and the lender. Generally, loan terms are fixed for up to 1 year, and in some cases, up to 2 or 3 years.

A viable exit strategy could include the sale of the property, a construction take-out, or a mortgage refinancing. Upon completion of the project, the borrower can sell the property and use the proceeds to pay off the loan. Alternatively, the borrower can take out a construction loan to retire the existing land loan. Lastly, the borrower can refinance the construction loan at a lower interest rate with a bank or institutional lender if they plan to retain ownership or rent out the completed units.