Construction Cost Overruns can jeopardize a home construction project’s progress. This leads to a shortage of funds and makes it hard to complete the project within the deadline.
If you’re in a situation where you don’t have enough money to finish the job it’s vital to figure out where the cost overruns are coming from before choosing how to handle them.
Understanding Budget Overruns and Their Solutions
Cost overruns in construction are not uncommon, and almost every d builder has dealt with them at some point. The average cost overrun for building projects is usually between 10% and 20%, which is why many lenders opt for a 20% contingency for possible cost overruns.
However, if a contingency plan is not in place, it may lead to financial trouble during construction. This is frequently caused by climbing costs for construction materials, shortage of labour, weather delays and other uncontrollable forces.
Implementing a sustainable risk management strategy is the best way to avoid the negative repercussions of environmental risks and overruns. With the right strategy, builders can ensure they don’t face construction cost overruns due to weather problems.
However, if drastic problems arise throughout the construction process, you will need immediate financial support. In this situation, you may have sufficient equity set aside for your project, but the banks’ strict requirements prevent you from using it to capitalize or provide sufficient financing to complete construction.
You have the money, but can’t access it unless you finish construction, but you need to use that money to finish construction.
If you haven’t prepared for cost overruns, and the bank refuses to help you, the best solution is to opt for construction financing. Construction Financing, also known as a draw mortgage, is a short-term mortgage that is utilized to finance the construction of a real estate project.
It is utilized by homebuyers, builders and developers that are planning to build single-family homes, multi-family homes, residential or commercial high rises, office buildings or industrial buildings.
At Freedom Capital, we provide land owners and developers with prompt, competitive and reliable mortgage solutions for commercial, multifamily and residential projects.
Get Construction Financing With Freedom Capital
At Freedom Capital, we have the reputation to look at the whole financial situation. We are a private alternative Mortgage brokerage firm where you can obtain a mortgage with simple terms and relatively less paperwork. We are committed to providing easy and quick financing in as little as 24 hours*.
Our focused, common-sense lending has made Freedom Capital an ideal choice for private/alternative construction mortgages. Due to our prominent position in the market, borrowers prefer us over conventional banks.
We provide our clients with professional services and are happy to assist them whenever they require it. From the first draw to the last, Freedom Capital offers builders and developers a trustworthy ALTERNATIVE source of project financing. Our experienced team will take your project from un-zoned to completed construction. We are here to help from the first draw to the last.