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How Do Construction Loans Work in Canada?

What is Construction Loan?

Construction loans could be the ideal financial vehicle to help you develop a new home for yourself and your family, whether you’re a builder or contractor, a small construction firm, or simply an individual.

In today’s economy, however, acquiring a construction loan isn’t always as simple as it appears. A traditional lender may take weeks to assess the sustainability of your home construction project, and even longer to determine whether you are eligible for a construction loan or mortgage.

What is a Construction Loan?

A construction loan is simply a short-term loan that is designed primarily for usage by a single home builder or smaller construction enterprises. Construction loans are used to fund the building of a new home or a real estate project, as well as the renovation or repair of an existing property.

construction loans

Construction loans aren’t intended to cover the total cost of a project; rather, they’re utilized as a temporary finance bridge to cover the project’s costs while it’s being built. The homeowner will typically find a longer-term solution by refinancing the existing construction loan and rolling it over into a more standard mortgage after the home is built and work is completed.

However, because a typical lender or bank may view your construction project as a hazardous investment, the interest rate will almost certainly be greater than you would anticipate from traditional mortgages. Furthermore, some construction loans have rigorous requirements that must be followed, such as repaying the loan in full by the time work is finished.

This is why Freedom Capital is in such a good position to provide you with the funding you need quickly. On a short-term basis, we offer a total sum of up to $150,000, and the application can be completed in minutes. Not only that, but some of our customers have received approval in as little as 48 hours!

How Does a Construction Loan Work?

Construction loans are short-term loans that are usually only intended to be used for a year.

Following the completion of the construction, the borrower normally undertakes one of two things. They could first refinance their construction debt into a more permanent construction mortgage. This means that a bank or other typical financial institution will own the mortgage on the new home. Alternatively, the construction loan can be paid off by taking out a second loan, known as an “End Loan,” which is a longer-term version of a construction loan.

Construction loans come with a variety of terms and conditions for repayment. Some construction loans demand the loan to be paid off in full by the end of construction, while others just need interest payments to be made on the loan during construction. The terms will vary depending on the lender you choose.

Rather than delivering the money to the borrower, some lenders choose to pay the loan amount straight to the construction business that is working on the project. The lender will transfer money in installments linked to each step of the building’s development when each stage is completed.

What Can You Do with Construction Loans?

If you’re a builder, construction loans might give you the freedom you need to expand your company. This could involve things like hiring short-term (or long-term) workers, paying contractors, or even getting the goods you’ll need to finish the job.

Here are a few possibilities for paying your payments with the money from your construction loan:

  • Hiring qualified new personnel to help your company grow.
  • Obtain the materials required to complete the home’s construction.
  • Purchase or lease more equipment to expedite the construction process.
  • Construction loans can be used to plan and/or design new projects.

You can even get creative with the funds from your construction loan if you’re a builder or a small business. For example, if your business is experiencing a slowdown during the low season (such as the winter), you could use the construction loan financing to better market your business through initiatives such as social media, blogging, website and SEO, or through testimonials and reviews to build trust and credibility with the local community.

Why Freedom Capital for Construction Mortgage?

We understand that construction companies may require urgent funding to satisfy short-term commitments.   That’s why we provide quick, easy, and reasonable short-term construction mortgage. Our online application takes just minutes to complete, and once approved, you can have up to $150,000 in as little as 48 hours.

Since banks and other lenders regard home construction projects as risky, the down payment amount from a bank or other lender can be exceptionally large, often as much as 20% or more. For people with a shaky credit history or bad credit, this might be a challenge.

Some of the benefits of working with us include:

  • Business loans starting from $5,000 are available.
  • You can get pre-qualified in a matter of minutes.
  • Simple application process: simply answer a few questions about your company’s nature and offer a brief account of your previous sales volumes.
  • Expect funds from your construction loan within 3-5 business days after your eligibility has been determined.

Fill out our simple application form online today if you’re looking for a fast and simple way to receive a loan without the headache of dealing with a bank.

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