Builder mortgages

Builder mortgages can be a very large and encompassing area of mortgage lending.  This article is about mortgage lending for home builders, more specifically lending low cost, flexible mortgage funds for their current completed homes that are in their inventory.

Many of our home builder clients have either larger commercial lines of credit to facilitate their home building expenses or obtain private builder financing or a combination of both.  This creates a two fold challenge:

• With builders’ lines of credit the challenge is our home builder clients run out of money as they continue to build.  For example if a home builder has a $5 000 000 line of credit, he starts five new homes a month, and his average land and build cost is $400 000, he will run out of money in two and a half months.
• With private builder mortgages, the challenge is that the cost for these funds is typically around 12% interest, so once the home is complete if the builder is still holding it, their profit margin decreases daily due to higher interest expenses.

Our solution for Builder mortgages that allows our home builder clients to free up their operating line of credit or to repay their higher cost builder financing is to fund an inventory mortgage for them.  The specific builder mortgages have:

• Limited personal qualification requirements
• Net 65% loan to value lending amount for our builders based upon the appraised value
• Fully open for repayment at any time
• Interest rates of 6.24% and a 2% lender fee added to the mortgage amount

Typically we see these builder mortgages fit our small to medium size home builder clients perfectly as it allows them to redistribute funds to either free up their current builder line of credit to facilitate ongoing building activities or to repay existing higher cost financing.  I welcome your calls or emails to discuss all of your questions about builder mortgages and the options we can arrange for you.

All the best,

Rylan – for builder mortgages 403-802-7201