A site development loan or mortgage is typically not provided as part of a construction loan for building and is a stand alone loan secured by a mortgage against the property.
The loan is provided, based on the value of the property immediately before site development is started, and immediately after the completion of the site development work.
To be more specific, site work can include landscaping, earth moving, the installation of services such as power, water, communications, and sewer, as well as any other preparatory work that brings the property up to a state where building permits for construction can be issued.
The main keys to site development financing is the market value of the property and the exit strategy to repay the loan.
This is, for the most part, an equity based financing activity due to the fact that the property is not in a revenue producing condition. That being said, if the builder, developer, or property owner has the ability to service the debt from other sources, then bank or conventional lending options can still apply.
The exit strategy for a site development loan is typically going to be either the resale of all or part of the land being landscaped and serviced, or the refinancing of the site development loan into a construction loan that recognizes the improvements made to the land and the related increase in equity this may generate.
Toronto site development loans can be in first or second mortgage position in terms of security. Second mortgages will typically cost more than first mortgage charges.
Development loans for land servicing can be acquired for single lots, a combination of lots, or larger scale developments or subdivisions.
If you are in need for a Toronto site development loan for a project you are planning or are in the middle of, I recommend that you give us a call so we can go over your requirements together and discuss potential financing options.