Calgary Construction Mortgage Financing Lawyers
Construction Mortgage & Financing Law Firm In Calgary, Alberta
Whether it is a new construction mortgage when you buy a piece of property or the refinancing for a construction mortgage of your existing property, the construction mortgage lawyers at Kahane Law Office in Calgary, Alberta can help. There types of mortgages are a little different than regular mortgages. It is important to have a law firm that understands construction mortgages and construction financing so that your project runs on time. Call today to learn more 403-225-8810.
What Is A Construction Mortgage?
A construction mortgage is exactly as it sounds. It is lender construction financing that lenders secured against the legal title to the property. The security is a mortgage for the purpose of construction. In some instances lenders require additional security like a general security agreement. Like any mortgage, a construction mortgage involves securing a debt instrument against the title to the property by registering the construction mortgage at the land tittles office. Learn more with our video on mortgages for construction in Alberta.
Types Of Construction Financing
There are two basic types of construction mortgages and construction financing. First, there are financing situations that fund completely on the first draw. A draw is when funds are actually advanced to the borrower. In these situations, the construction project is usually mostly completed. The second, and more common, is one that involves funding in several pre-set stages. The number and timing of these staged draws vary from mortgage to mortgage. Construction mortgage lawyers help you to understand the differences. For example, as a general guideline the mortgage draws will fund in stages at the following stages of construction:
- purchase of the land;
- on completion of the building’s foundation;
- at the lock up stage (on the completion of the framing and instillation of all of the doors/windows. For example, this means that the your or the contractor have the ability to lock up the building);
- After the completion of drywall instillation; and lastly
- When the final completion of the property occurs and / or on the issuance of the Occupancy Permit.
How Draws Work With Construction Mortgages
Your construction mortgage lawyer will receive mortgage instructions from your mortgage lender. These instructions detail the stages that the draws occur on. However, in addition, they also set the terms on how they fund. There are several ways that lenders determine if a draw stage meets its definition of completion prior to funding. These methods involve specific instructions to the lawyer set by the lender and your lawyer lacks the ability to change them. It is a very good idea to negotiate these with your lender. Depending on the type of construction involved on the specific property, most often little ability exists to negotiate these details with the lender. For example, some draw funding determination processes include:
- On presentation of receipts for construction/ renovations to the property. At this stage the borrower receives the funds they previously paid to the contractor;
- The presentation of the contractor invoice to the construction mortgage lawyer. At this stage the contractor will be paid directly by your lawyer. Talk to your lawyer about situations where you want to hold back funds; and lastly
- On inspection of the property by an Alberta registered property appraiser. The appraiser notifies the lender directly and the lender then funds money to the construction mortgage lawyer. At that stage, the lawyer then transfers the funds to the borrower.
Understanding The Process Of Draws
Lenders want to make sure that they have equity in property. By paying a borrower back for work, at stages, done to the property, the lender can be sure that the value of the property is increasing prior to funding. This means that their security in the property remains at a certain percentage to loan ratio. Most often policies pre-determine these ratios. For example, CMHC policy often acts as the basis for lending and fund advancement decisions in construction financing. Again, this arrangement details exist prior to the engagement with your real estate lawyer. Usually, the detail negotiations occur in advance with the lender or your mortgage broker. Always reach out to your lawyer for support when needed. This usually avoids problems with funding.
Builders’ Liens And Construction Mortgages
Finally, as construction mortgages involve construction or delivery of materials on a property, builders’ liens may result. There is an absolute requirement for 10% to be held back from each draw for 45 days. This 45 day period is the lien period set out by statute. Experienced contractors understand this Alberta law. Your real estate lawyer then holds these funds and release them to you after the expiration of 45 days. Learn more about builders’ liens here. Lenders need to protect themselves and will not usually accept a declaration from the borrower that all the trades have been paid in full. This is because, a borrower will not be aware if any sub-trades have been paid by someone paid by the borrower. With construction financing, a lender is always concerned about unpaid trades.
Construction Mortgage Lawyers In Calgary
Ensure your build happens on time with the proper funding of your project. If you are building a new home, commercial project or are refinancing to start a construction project, the construction mortgage lawyers at Kahane Law Office can help in Calgary. Contact our experienced team today to see how we can help in your construction financing situation. Call or email us at any stage if nay questions come up. We are located in Calgary, Alberta. Call toll-free at 1-877-225-8817 (403-225-8810 locally), or email us directly here.