Building Homes Cheaper and Faster With Construction Loans
- September 19, 2016
- Category: Loans
Funding is a major problem in home construction. It is usually difficult to take on the project of building your own home without the required finance. A construction loan however eases this problem. Construction loans are precisely tailor-made to provide the much needed financing with the smallest of hassles and with so many affordable repayment packages for the borrower. A major benefit of taking up a construction loan is the fact that the borrower only has to pay for interest during the course of construction and pays the principal amount upon completion.
Interest rates on construction loans depend on the schedule of construction. The borrower is awarded a certificate of occupancy, in which only the construction is taken as completed. Typically, Lenders will charge interest rates based on certain phases during construction. Loan amounts differ from lender to lender, and are largely based on the worth of the land the building is to be erected on.
Construction loans are a form of short term loans. However, you are expected to pay off loans as soon as construction is completed and after receiving certificate of occupancy. Construction is quicker to complete these days, so loans are expected to be repaid within a period of 6 months to a year. Borrowed funds are usually repaid back after construction and not to be paid on instalments, as this may take up too much of the fund needed to actually build the home. However, if the borrower is unable to pay off the loan upon completion, permanent financing is provided upon request to the borrower. However, there is an option to combine construction loan and permanent financing to evade the hassles of having to pay extra fees for applying for funding the second time. For those with bad credit, the benefit of construction loan rests in the varying interest fees. Bad creditors will not be charged higher based on poor credit history. Because construction loan varies upon each stage of the building process, interest fees may reduce at a certain stage and even remain unchanged for a while. There is also the option of a fixed charge bad credit construction loan option, which enables borrowers keep interest rate constant for a particular repayment period, ranging from 10 or 30 years.
It is advised to do a thorough research on the internet and carefully compare construction loan providers including their terms and conditions applicable to getting the loan. This is a great way to find the one that best suits you. It is recommended to choose a construction loan that stretches till the completion of construction or you can also decide to convert it to a mortgage loan. It is advised that you apply via the internet as it is one of the fastest ways of getting approved.
Construction loan offers you the chance to construct your building in your own style and pace. Be sure to carefully go through the different aspects of the loan and compare loan fees and condition before choosing one.
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