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3 Things To Understand Before Getting Started With Construction Financing

August 4, 2020

Construction financing has served hundreds of clients in a niche that banks just aren’t equipped to help home-owners with. MonsterMortgage.ca knows it can be overwhelming to go through a major home renovation project and our agents are always here to help you through the process. Here are 3 quick things to understand to properly structure your construction debts and project:


  1. Construction Financing

A construction financing mortgage is a specific plan for your renovation or construction project, which can be difficult to find through the banks. It is planned differently than a conventional mortgage or line of credit since it is a specialized mortgage product. Construction financing can be a good solution for a major renovation that a home equity line of credit may not suffice.


  1. Scope of Work

A key part of the renovation and house flipping project is the Scope of Work (SOW). It is a detailed outline for all the planned construction, including what work is being done, who will be doing the work, timeline for completion, and the costs for the project. It is one of the first things a lender will want to see. The SOW will help you manage the various steps of the project and give contractors a plan to be responsible for.


  1. Loan to Value (LTV) VS. Loan to Cost (LTC)

LTC and LTV are two very important acronyms to understand in the construction financing process. LTC represents the percentage of the loan amount over the actual costs of the construction project. LTV represents the percentage of the loan over the final appraised value of the completed project. Lenders that will be funding the construction project will evaluate these ratios as part of the underwriting analysis.



If you’re considering a renovation, whether it be large enough for a construction team or small enough for a weekend warrior, get the Monster on your side!