The Situation:
- The borrower was looking to tear down their existing home and construct a new 6,325 SF custom home.
- There was an existing 1st mortgage on the property which would not provide or approve any construction financing.
- A good portion of the borrower’s working capital was tied up overseas and inaccessible.
- During construction there were unexpected project delays, affecting both the completion of the project and repayment of the existing mortgage.
The Solution:
- The loan was structured as (i) a land facility sufficient to pay off the existing mortgage on title and some equity to start the construction, (ii) a construction facility for 100% of the hard costs, which was advanced on a cost-to-complete basis, and (iii) an interest reserve to deal with monthly payments.
- The loan was tailored to allow for maximum flexibility, by enabling the borrower to request as many draws as needed. Due to the client’s inability to quickly access additional working capital, 12 frequent loan advances were needed to keep trades and suppliers paid and avoid delays.
- By not pegging loan advances to specific milestones, the project was able to move fairly quickly and was completed within 15 months of closing. Due to quick funding, liens were avoided, and the project was refinanced with a financial institution.
Loan Amount: $3,135,000
Rate: 7.99%
LTV: 60%
Location: Markham, ON
Priority: 1st mortgage construction
Property Description: Proposed 6,325 square foot home