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.
To begin with, a typical construction mortgage is of short duration. Known as a short-term mortgage, it usually runs no more than three years. It is a form of real estate financing and is secured by a mortgage on the home or property being financed. It is specifically meant to cover various costs, which usually revolve around the cost to develop the land and to build the structure.
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."
This particular kind of construction loan or mortgage is a good financing instrument to take advantage of in order to avoid the issue of paying double closing costs or double the amount of fees when one obtains a separate construction loan and then an additional permanent mortgage once construction has been completed. Also, permanent interest rates can be locked in at the beginning of the construction.
This last feature is particularly outstanding, as there have been many persons who have obtained these kinds of mortgages who have later been able to avoid a significant increase in the mortgage interest rate when the construction was completed. More traditional forms of this mortgage, carried out in two stages, would see the new mortgage being executed at a significantly higher rate.
Try to keep in mind that when dealing with a mortgage of this type it is an excellent idea to sit down with the lender and the building contractor and come to a formal agreement as to payment schedules involved in the construction. For the most part, alone of this type is paid out in separate stages as the construction moves along. Therefore, come to solid understanding of payment due dates.
At any rate, it makes much more financial sense to keep almost any borrowing activities with the same lender if possible. This is because trying to line up a separate construction mortgage for the purchase and then construction of the home and then another mortgage for the final product can lead to a significant increase in the amount of fees and closing costs when added together. - 31366
To begin with, a typical construction mortgage is of short duration. Known as a short-term mortgage, it usually runs no more than three years. It is a form of real estate financing and is secured by a mortgage on the home or property being financed. It is specifically meant to cover various costs, which usually revolve around the cost to develop the land and to build the structure.
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."
This particular kind of construction loan or mortgage is a good financing instrument to take advantage of in order to avoid the issue of paying double closing costs or double the amount of fees when one obtains a separate construction loan and then an additional permanent mortgage once construction has been completed. Also, permanent interest rates can be locked in at the beginning of the construction.
This last feature is particularly outstanding, as there have been many persons who have obtained these kinds of mortgages who have later been able to avoid a significant increase in the mortgage interest rate when the construction was completed. More traditional forms of this mortgage, carried out in two stages, would see the new mortgage being executed at a significantly higher rate.
Try to keep in mind that when dealing with a mortgage of this type it is an excellent idea to sit down with the lender and the building contractor and come to a formal agreement as to payment schedules involved in the construction. For the most part, alone of this type is paid out in separate stages as the construction moves along. Therefore, come to solid understanding of payment due dates.
At any rate, it makes much more financial sense to keep almost any borrowing activities with the same lender if possible. This is because trying to line up a separate construction mortgage for the purchase and then construction of the home and then another mortgage for the final product can lead to a significant increase in the amount of fees and closing costs when added together. - 31366
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