How Do You Finance Construction in Whistler?
Two components to financing a house build in Whistler, 1) the cost of buying the vacant land, or land with a tear-down house on it, and 2) determining the construction cost budget of the build.
When are the Funds Released to the Borrower to cover Construction Costs?
In Canada the borrower does not receive a lump sum from the lender in advance of construction. The borrower must inject all their funds into the project before the lender will release the borrowed funds.
Who Controls the funds to Build a House is it the Bank or the Borrower?
The lender controls the draws, ensuring the build has enough money to complete at every draw. Based on the budget, any overruns need to be covered by your own funds as the loan can’t be (easily) increased mid-flow.
Can I get Financing on Vacant Land?
Financing land alone is generally harder to accommodate while you determine your construction costs and plans. It can be done but this loan is typically open and usually costs prime plus a set-up fee. The lenders seem to be more enthusiastic about financing the purchase of land with a construction loan rather than just financing the purchase of the land for investment purposes. However, anything is possible.
Can a Non-Resident get Construction Financing?
Construction financing for non-residents is specialized and not offered by most lenders. Alternative financing as well as bank financing may be required. With the cost of building a house in Whistler, talking with the mortgage broker before writing an offer would be prudent.
Can you give me an Example of the Financing Process?
When a construction mortgage starts, the borrower has to inject all their funds before any draws on the loan take place. If a Buyer was to request a loan, based on 50% of the costs the Buyer would be expected to spend their 50% before any construction money would be advanced. All construction projects work on a “cost to complete” basis, meaning that the lender is always holding back what is left to be spent on the build.
The following is an example of the client spending all their funds before the lender’s construction funds can be advanced:
- Land cost: $4M.
- Construction costs: $10M.
- Lender is financing 50% of $14M which is a $7M loan.
- Buyer: has to inject $7M.
- The lender controls the draws making sure the build has enough money to complete at every draw.
- The borrower pays interest only on the funds drawn at each stage of the build.
- Based on the budget, any overruns must be covered by the borrower’s own funds as the loan can’t be easily increased mid-construction.
- It takes the lender 7 – 10 days to advance funds during the construction. During that time an appraiser is required to visit your site and confirm the stage of the build. Then a lawyer processes that draw and advances the new construction funds to the borrower.
Summary
Obviously, getting financed depends on your current situation, and everyone has a slightly different scenario. Therefore, once you connect with me, I will set you up with an experienced local builder, and a mortgage broker. I will be with you every step of the way to ensure that you are moving along at the pace you are comfortable with. It is a process and one that many people have journeyed before.
Marion Anderson Personal Real Estate Corporation
marion@WhistlerSkiinSkiout.com (604) 938-3885