Real estate development
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Construction of a house (individual, semi-detatched, etc.)
In this context, it is very easy to determine the construction cost per house, as well as the share relating to it. It all goes back to the general contractor's standard construction, even though it is more difficult for a developer to open an account for a construction loan in each of the future owner's banks. Due to administrative reasons and cost management, the developer will certainly restrict accouns to a limited number of financial institutions, depending on the scope of the project. At the consolidation, as long as he is not continuing with partial consolidations, the future owner will be free to choose the financial institution.
Construction of an apartment
In this case, it is more difficult to determine right away the precise cost of each trade. As a matter of fact, the floor of your apartment is also the ceiling of your neighbour downstairs and the roof of the building covers not only the top floor apartment, but everyone below.
It is going to be impossible for the developer to dissect each invoice by apartment. Therefore, he or she must review the overall budget of the project and distribute the cost depending on the space and the location of each share. In order to justify the use of funds, the developer will base its choice on a single banking institution. This choice is important for buyers because they will "have to" apply for the same bank for a construction loan. At the same time, the financial institution will require the developer to provide certain information to proceed with the construction (number of shares sold before the construction can begin, the personal equity that the general contractor must invest in the project in relation to the shares that have not been sold before the start of construction, etc.)
In light of these specifics, it is very likely that the developer will impose a bank. But what happens if the final client does not want to work with this institution or is refused financing? In most developmesnts, the buyer does have "the right" to apply to a different bank. This might allow the buyer to benefit from a lower interest rate or enjoy personal comfort because there is already a banker who manages the buyer's various accounts. Just be careful because no matter how beneficial it might seem, there are still some risks. The buyer's banker will not have seen the account of the general contractor that is held by another financial institution. Therefore, it will be impossible for this banker to monitor the general contractor's account at a different institution. Thus, he can not monitor how the payments that have been made are allocated. With no control over the financial plan, the banker will not accept any pecuniary responsibility for the construction propelling him or her to sign a disengagement document. If everything goes well in construction, this is an easy and friendly process. However, in the event of complications (poorly executed work, long delays, artisans not paid, or even worse, the general contractor's bankruptcy), this will become very uncomfortable process. The customer will be forced to turnover accounts to his or her bank and try to manage a delicate situation with the general contractor, assuming that the latter still exists. However, for the buyer who is financed by the developer's bank, things will be easier. The buyer can simply rely on the response of the financial institution responsible for the project, since this institution will be so invested in the construction that it will be obliged to find solutions to finish the project in the best way possible.
There is one last resort and a good reason to favour your personal banker: the reversal act. This is a document drawn up by the developer's bank that commits the bank to the buyer (or the buyer's financial institution) and allows it to control how the funds paid are to be used. This act makes up for the disengagement document mentioned above. The developer's bank does not gain anything for itself, but still takes on all of the risks.
With this in mind, we encourage you to work with the developer's bank during the construction period while still leaving the door open to consolidate whenever you wish.
Current mortgage rates
Libor mortgage from%
Fixed-rate 10 years from1.81 %
Fixed-rate 5 years from1.12 %
The displayed interest rates are the best rates currently available. Your personal interest rates may vary depending on LTV, affordability, mortgage amount and the location of the property.Your personal rates