There are actually six forms of construction financing that can be utilized for a construction project, depending on its type and capital requirements.
The first type of construction mortgage financing is land acquisition. this can be bare land, undeveloped, lots that are serviced or unserviced, and so on.
The second type of construction loans is for land or site development. This includes costs for landscaping, road and sewer construction as well as any other necessary infrastructure required before building construction can take place.
The third form of construction financing is for the costs associated with new building construction, addition, or renovation. This is the most common form of construction mortgage financing provided by a construction mortgage broker, and will be at least part of the financing for any given project.
The fourth form of canadian mortgage financing for construction is a construction bridge loan. This is a smaller loan put into place on the property behind the main construction loan to cover any short falls from the initially approved construction funding and is typically provided by a private mortgage lender.
The fifth form of capital is only utilized by condo development projects. Once the construction is completed, there can be delays before condo registration is provided. In this interim period, additional funds can be required to continue to cash flow the project until condo units can be sold.
The sixth and final form is the take out mortgage, which is a long term mortgage that pays out all the other mortgages in place once an occupancy permit has been issued and the lien hold period has expired.
