Types Of Construction Loans

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Types Of Construction Loans


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Broadly, there are primarily two types of construction loans, based on the type of construction for which the loan is being sanctioned.

So for large commercial projects, commercial construction loans are offered, while residential construction loans are offered for people building their homes with the money. Residential construction loans are far less complex than their commercial counterparts.Residential loans are of two types, a construction only loan or a construction to permanent mortgage loan. A construction only load is a short term loan granted for a maximum period of 1 year, and only the interest is paid while the construction is going on. But when the time period for the loan is over, the full amount must be paid. In this case, a separate mortgage on the house must be taken to pay off the loan. The other type is where the lender supplies the construction loan for the period of construction, and the borrower pays only the interest while the construction is going on. But when the home is constructed, the loan converts to a mortgage with the house as collateral till the borrower pays it off.

Commercial loans are more complex and varied depending on the need of the borrower. One common feature of these loans is that lenders do not supply the full amount of development, but only around 85 percent of the amount. Long term loans as well as interim loans (till long term financing is secured by some other means) are also handed out. Another type of commercial loan is when the lender acquires some stake in the project and shares the profits or loss incurred as well. 

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Types Of Construction Loans

 
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Home Loans :

What-Is-A-Home-Construction-Loan      If you have just inherited or bought a piece of land and want to build a home on it, a home construction loan is the type of loan you are looking for. There are two basic types of construction loans, one for large commercial projects, and the other meant for individuals who want to use the money to finance construction of a house. There are a few key points which separate a home construction loan from other types of loans. More..



 
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Types Of Construction Loans