Considering a construction loan?

Construction Loans

You may opt to build your own home rather than buying an existing property. To achieve your dream of owning a home through construction, you will need to gather enough finances for this purpose. One way through which you can finance the construction process is through your own savings. However, this can be a challenge given the amount required. Another option is sourcing for construction loans. Here, we will familiarize ourselves with this financing model, looking at its advantages and disadvantages.

Construction loan is a short term loan that home owners or property owners by extension use to cover the cost of putting up a structure, such as a home or a commercial property. The money may also be intended for rehabilitation of a home or a property. The main purpose of taking up a construction loan is bridging the gap between the amount available and actual cost needed for the construction process. Unlike other types of loans, construction loan normally attracts higher interest and is based on the fair market value of the property. In computing this figure, the lender will determine the condition of the property, comparing it with the recent sales and construction loans. The projection is normally based on the expected value of the property once it is completed.

Types of Construction Loans

Construction loans can be divided into three different types, namely:

Construction to permanent: This type of loan is suitable when one intends to put up a home and the required plans and timeframes are already in place. The lending institution normally pays the contractor or the builder based on the milestones- as the work get completed the lender disburses the amount needed. The cost will then be converted into a mortgage upon the closure of the project. With this type of finance, the borrower is allowed to lock the interest rates making it easy for steady repayments.

Construction only loans: This type of loan is supposed to be paid in full upon the completion of the building. This is a convenient form of financing especially when one is confident that when the property is sold the proceeds will cover up.

Renovation construction loan: buyers who are looking to fix a building can use this type of financing. It covers the cost of renovations. It is wrapped up in the mortgage together with a buying price.

Construction loan will provide you with the finances that you need to build or renovate a building, whether for your own use or commercial purposes.

We do construction loans for investment and primary residence properties. Give us a call and show a scenario so we can tell you what we can do for you! 561-609-6699