What to know about a construction mortgage will be necessary whenever one is considering building a home or some other type of building on land that has either already been purchased or will be purchased as part of the construction deal. This sort of mortgage comes in handy as a way to finance land purchasing and building construction, but there are some things to be aware of.
The first thing to understand is that the majority of these mortgages are of around three years in duration, and they are really nothing more than a type of financing a real estate with the land purchase and construction secured by a mortgage taken out on the land and structure being financed. Mortgages like this are intended to cover land purchase and building construction costs.
A loan or mortgage of this type can also be a smart way to renovate a home prior to moving in and occupying it. For those who are relatively light on cash and don't have much to apply to renovation or construction, this is especially well working mortgage. It has been structured to enable borrowers to get their hands on a significant amount of the cash needed for such a project ahead of time.
Additionally, there are mortgages of this type that are made available and which feature a much better interest rate when only a small amount of money will be required in order to renovate the structure prior to obtaining a certificate of occupancy from the local town or city and then occupying it. The most common variation of this loan is called a "construction to permanent loan."
It can make for an excellent way to avoid paying double closing costs -- because you will only be paying closing costs one time -- and the construction loan will become a traditional mortgage once construction has been completed and a certificate of occupancy obtained. This sort of loan also allows the borrower to lock in a permanent rate at the beginning of construction.
This last feature is particularly noteworthy because is the case in many instances that the interest rate that is obtained at the beginning of construction or renovation can be lower than the interest rate that will be instituted when the loan becomes a permanent mortgage. There have been many people taking advantage of more traditional construction mortgages that have been confronted with this at closing.
One thing to keep in mind with a construction mortgage regardless of the type is that the contractor building the home, the borrower and the lender will need to make arrangements for a payment schedule that will be effective and mutually beneficial to all three parties. Usually, this loan is dispersed as each stage in the construction has been completed. Still, make sure of when payments are due.
Additionally, it is also a good idea to try -- whenever possible -- to keep all borrowing with the same funding source. It makes sense to do so because it becomes doubly hard when one has to obtain construction loan financing from one lender but then has to turn around and attempt to obtain permanent mortgage financing from a different lender. Fees can double in many cases. - 31387
The first thing to understand is that the majority of these mortgages are of around three years in duration, and they are really nothing more than a type of financing a real estate with the land purchase and construction secured by a mortgage taken out on the land and structure being financed. Mortgages like this are intended to cover land purchase and building construction costs.
A loan or mortgage of this type can also be a smart way to renovate a home prior to moving in and occupying it. For those who are relatively light on cash and don't have much to apply to renovation or construction, this is especially well working mortgage. It has been structured to enable borrowers to get their hands on a significant amount of the cash needed for such a project ahead of time.
Additionally, there are mortgages of this type that are made available and which feature a much better interest rate when only a small amount of money will be required in order to renovate the structure prior to obtaining a certificate of occupancy from the local town or city and then occupying it. The most common variation of this loan is called a "construction to permanent loan."
It can make for an excellent way to avoid paying double closing costs -- because you will only be paying closing costs one time -- and the construction loan will become a traditional mortgage once construction has been completed and a certificate of occupancy obtained. This sort of loan also allows the borrower to lock in a permanent rate at the beginning of construction.
This last feature is particularly noteworthy because is the case in many instances that the interest rate that is obtained at the beginning of construction or renovation can be lower than the interest rate that will be instituted when the loan becomes a permanent mortgage. There have been many people taking advantage of more traditional construction mortgages that have been confronted with this at closing.
One thing to keep in mind with a construction mortgage regardless of the type is that the contractor building the home, the borrower and the lender will need to make arrangements for a payment schedule that will be effective and mutually beneficial to all three parties. Usually, this loan is dispersed as each stage in the construction has been completed. Still, make sure of when payments are due.
Additionally, it is also a good idea to try -- whenever possible -- to keep all borrowing with the same funding source. It makes sense to do so because it becomes doubly hard when one has to obtain construction loan financing from one lender but then has to turn around and attempt to obtain permanent mortgage financing from a different lender. Fees can double in many cases. - 31387
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When you're deciding to buy a house, some of the factors that you have to take into account are mortgage rates. As mortgage rate is important for home-buyers, GIC rate is important for investors. If you're interested in a customized financial plan, remember to visit us.
