Construction Loans Can Help You to Build Your Home

The post Construction Loans Can Help You to Build Your Home appeared first on Oak Laurel.

Construction Loans Can Help You to Build Your Home

When you are in the process of building your home, it is an advantage to be fully informed about how you can finance the construction with a loan.

It is also possible for you to get short-term financing for the construction of your dream home. Lenders who provide construction loans will expect you to mortgage your property to them as collateral for any loan that they give you. You can get a loan that covers the cost of purchasing the land as well as the cost of building a home on that land.

Most loans are provided in instalments depending on the stages of the construction. These loans are short term, and in most cases borrowers may capitalise the interest charges during the period of construction. Usually construction will need to start within a year of finance being received and must also be completed within a year or 18 months of starting the work.

Before your construction loan will be approved, lenders will require you to provide them with plans and specifications that have received approval from local authorities and a building contract that has a fixed price. You will also have to prove your financial viability and have the plans of the home appraised by the lender to ensure that the loan amounts asked for are justified.

The lender becomes a partner in the building project and will require to be regularly advised of the progress of construction. After the loan is approved, payments can be made in stages for the purchase of the land, beginning with foundation work, completion of the structure and the final finishing. You may be able to opt for more stages of payment if your contract with a builder is fashioned in that way and the lender agrees. Once the construction is completed, the loan can be rolled over into a standard home loan or mortgage.

Interest is calculated as per the amounts disbursed till that date but generally will not become payable until after the construction is complete and the loan converts to a home loan. Most construction loan lenders charge the same interest rate or a couple of points over the usual home loan interest rate (unless you have an unusual situation like having bad credit). However, the fees associated with a construction loan are usually higher than a typical home loan. This is because the lender will charge more to process the documentation associated with the approvals and building contract. Fees can also be charged for inspections associated with verification that work has been completed prior to releasing funds to pay the builder at the different construction stages.

If you are building a home as a first home, you may be able to get a grant from the government to help you.

Using a construction loan broker

It is always advisable to take the help of a knowledgeable construction loan broker when you need a construction loan. They are the people who are knowledgeable about construction loans and have the experience that will be able to guide the you on all the formalities that need completion before the construction loan can be approved.

Contact an Oak Laurel construction loan specialist to explore your options.

+614 30129662

Oak Laurel – Construction loans made easy!

Oak Laurel Mortgage Broker

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