In vast majority of cases, external funding is necessary for a property development plan to succeed. While many banks are open to issuing such loans, there are many factors to consider before filling out the forms. The following checklist can be a valuable reminder of key variables to keep in mind when looking for a construction loan Guelph or a similar community:
Total amount of the loan
Estimating your financial needs accurately and making sure that you are eligible for a loan of that size are the initial steps that have to be completed before doing anything else. The banks will carefully examine your credit history, revenues, and other relevant info before coming up with the maximum number you can borrow. That’s why you should do some math on your own and aim for a sum that’s realistically within your reach.
Future use of the property
It makes more sense to borrow a larger amount if you are building a commercial facility that will pay for itself over the lifetime of the loan. On the other hand, a family home won’t produce any revenue once it is finished and it would be best to avoid heavy debt for its construction. You should also take future maintenance expenses into account when you are making the financial projections, or you might be forced to take another loan for renovations in ten years.
APR, or annual percentage rate, is the key parameter that determines how much money needs to be paid back in total. Usually ranging from 2-3%, the rates vary from lender to lender and from one financing product to another. Some loans come with a fixed rate that remains constant throughout the loan, while in other cases APR’s fluctuate based on input from the Bank of Canada. Naturally, you should aim for an as low-interest rate as you can get.
To put it simply, amortization period is the number of years it will take to repay your debt. According to Canadian law, standard amortization period is 25 years although banks can negotiate shorter or (rarely) longer intervals. Extending this period to full length will lower regular monthly dues, but shorter plans have the benefit of being cleared off the books sooner, giving full legal ownership of the property solely to the borrower.
The most reputable lender
A quick online search will reveal a huge number of offers for a construction loan in Guelph, with dozens of lenders competing for customers. While the Canadian mortgage market is generally well-regulated and fraudulent practices are rare, it is still prudent to do a background check of all lenders on your short list and cross out any that raise doubts of any kind. A loan of this size means you shouldn’t be taking chances with subpar providers.