Definition Construction Loan

line
 

 

line

Definition Construction Loan


Apartment Listing  

Construction loans are sums of money lent to future home owners to pay for the construction of their homes. The completed house serves as collateral.

Construction loans are extremely contextual. The lender usually needs to know every little detail about the planned construction before sanctioning the loan.Every construction loan is unique since every construction differs in things like rate of construction, budget allotted etc. Thus there are no standardized features of a construction loan, as you would find with a mortgage loan. There are, however, some common features that you will find in most construction loans. These include:

  • Typically construction loans require the borrowers to make interest-only payments until the construction is complete. Once the house is occupied the loans become due. The completion of a house is established when the owners have a certificate of occupancy.
  • Construction loans are usually short term loans that have to be repaid in a year or less. Many home owners opt for a ‘one close’ construction-to-permanent financing program. This makes the paperwork of applying for a new mortgage easier to deal with.
  • The home owner, contractor and lender sit down and come up with an approximate rate at which the money can be drawn. The lender usually does not provide a lump sum but instead issues the necessary amounts when the required expense comes up. The interest isn’t charged on the whole amount, but is based on the amount of money you have received from the lender at a particular point of time.
  • Construction loans usually have rates similar to prime mortgage rates. The lender will not usually agree to lend you the entire sum you spend during construction. But a large part of the cost will be covered by the lender if the construction is reliable.

More Articles :

Definition Construction Loan

 
line
money

Home Loans :

How-Construction-Loans-Work      Construction loans are basically known as ‘story loans’ in the business. Thus, before sanctioning a construction loan, the lender needs to know the whole story behind the construction. He will ask you about details like the rate at which you aim to finish construction, the reasons for the construction and so on and so forth. Due to this relativity, every construction loan is different. There exists no standardized construction loan like there are for standard mortgages. More..



 
line
bottom
 • Home  •Commercial Real Estate  •Foreclosure  •Moving   Packing Property Taxes
 •Termite •Interior DesignRenting Laws Privacy Policy Contact


© 2010 Apartmentlisting411.com, All Rights Reserved.
Definition Construction Loan