Construction Loans
We can help you build your dream house, from purchasing your land to financing your build with a construction loan. We will guide you through every step of the construction process, help you achieve your goal, and offer guidance, expertise, and assistance throughout the building process.
The best thing about a construction loan is that you are not paying for the full amount of the loan at the beginning of your project. This can potentially save you thousands of dollars while you are building.
Here is some information below.
5 Things to consider when looking for a Construction Loan.
Construction loans are short-term loans designed to cover building a home or other real estate project costs. These loans differ from traditional mortgages in a few key ways:
Short-Term Financing: Construction loans typically have terms of 6 to 18 months, though they can be extended if needed. Once the project is complete, the loan is either paid off with a traditional mortgage or refinanced into a permanent loan. The loan is then refinanced after the construction has been completed.
Draws or Progress Payments: Funds are released in stages based on project milestones instead of getting all the money at once, like a regular mortgage. For example, the builder might request a draw to pay for the next phase after finishing the foundation. Construction loans let you take money out at different stages of building, usually 5-6 stages during the construction. Increasing the loan in stages with progress payments from the bank will save you money in the first year of your loan.
We will be there every step to ensure that the builder requests the correct payment percentage at each stage of the building process.
Interest-Only Payments: During construction, the borrower usually makes interest-only payments based on the amount of money drawn. This keeps costs lower during the build and will save you money while building.
Higher Risk: Because construction projects are unpredictable and there's more uncertainty involved, construction loans tend to have higher interest rates than traditional mortgages. Lenders may also require a larger down payment, typically 20% to 30%.
Types of Construction Loans:
Construction-to-Permanent Loans or Refinancing: This type of loan converts to a standard mortgage once the construction is complete. This option saves borrowers from having to take out two separate loans.
Stand-Alone Construction Loans: These are short-term loans used just for the construction phase. After the project, the borrower must apply for a separate mortgage to pay off the loan.
Suppose you're looking into a construction loan for a personal project or a more considerable development. In that case, there are a few things to remember, like budgeting for overruns and finding a lender specialising in construction financing.
We will be there every step of the way to ensure you get the best possible advice and support throughout your building project.