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Still unsure about home construction mortgages?
It’s OK! We get it you aren’t a mortgage guru, yet. Here is the bare bones, no bull explanation of these specialty home loans. There are 2 types of home construction mortgages.
- Construction-to-permanent: You borrow to pay for construction. When you move in, the lender converts the loan balance into a permanent mortgage. It’s two loans in one.
- Stand-alone construction: Your first loan pays for construction. When it’s time to move in, you get a mortgage to pay off the construction debt. It’s two separate loans.
Construction loans enable a new home to be built through the multiple phases of construction. The phases are milestones to keep the builder focused. Home construction mortgages are all different lengths based on the typical time needed to build your home. Loan length varies from six months to a year depending on the customization level you choose. Once you have secured a home construction mortgage, your lender will pay your builder after each interval of work is completed. See each lender for a thorough explanation of how each could benefit you.
There are FOUR unique ways that make home construction mortgages the most practical choice.
- Save capital and liquidity. You do not have to pay the builder up front and tie up a large amount of capital. All the while praying you are able to finance the home post build.
- The bank helps protect you from fraud. It’s like having a big brother that pays to have huge of law firms on retainer.
- Higher loan limits available up to 5 million.
- Many banks allow you to stay in your current home during construction. Why move twice or pay huge premiums for long term housing?
BUT what do the banks get out of this?….
- Higher client loyalty typically from desirable high-income earners
- Some banks require you to have a checking, savings or investment account with them