Construction loan center is actually gaining popularity and attention amongst people. If you are planning to build the house of your dream particularly when you are in need of financial support, then it is going to be smart to know more about this. On the other hand, prior to joining the bandwagon and get a loan, it is vitally important that you have thorough understanding of the loan.
So what’s with a construction loan offered by construction loan center? Well, it is basically a short term, interim loan used to finance the construction cost of your dream house. The credit providers or lenders will be securing a mortgage over real estate property that you’re financing and they’ll be creating periodic payments to your builder or house developer at periodic interval. All of this while the work is in progress.
Construction loan center has different requirements and credit policies that they apply when processing the loan application. But don’t be so confused immediately since most are the same. By reading the next paragraphs, you’re going to know about how credit providers or lenders fund the construction loan.
Number 1. These entities are going to fund the amount of the loan needed by the client in order to cover for the entire cost of buying the vacant land and the cost of building the property.
Number 2. Before the construction commence and if you’ve borrowed to buy vacant land already to which you’re building your new house, the first loan disbursement that’s made by the construction loan center will pay off the vacant land first.
Number 3. The providers are going to breakdown the amount of loan into progress payment drawdown amounts. At the completion of every stage of construction, this would be made to the builder.
While construction loan is nearly the same with the traditional mortgage that you know, it has a number of differences similar to the fact that the interest is calculated against the portion of the money borrowed and been drawn down, it is usually a short term solution with a max of 12 months, the construction of the house has to be done within the same year of first progress down payment, the construction of new house should commence within 1 year of loan settlement and the borrowers are expected to pay the interest during the period of construction.
The construction loan center are going to arrange everything to prepare valuations before progressing payments to the builder. This will be done at every construction stage from buying of vacant land, laying of flooring, installation of roofing including the frames, lock up stage and lastly, the completion stage.