If you dream of building your own home or purchasing a house that needs some work completed on it, it’s a good idea to learn now about construction mortgages. There are different processes involved with securing this type of custom loan, which we will get into here.
Two general types of construction mortgages exist
The simplest type of mortgage for construction is one that will provide the home purchaser with rates for the loan for the construction period as well as one for afterward. Typically, one year will be given to complete the construction, and penalties will likely be put in place should the building not be completed on time.
A second type of mortgage in this category is one that allows you to purchase a home and then spend time on getting repairs or renovations completed. This funding can provide you with expanded possibilities for how you can fix up your new home, sooner rather than later.
The loan can be used to cover a wide range of construction tasks
You will likely need to hire a few professionals to help you out, whether you want a brand new house built or the home you are interested in is in need of improvements before you can enjoy it. The great thing is that you can get a loan to cover much of the costs that come associated with these necessities. Everything from paying for building permits to hiring an architect and contractor can possibly become covered under a construction mortgage.
Construction mortgages can be difficult to attain because of the risk involved
Purchasing an empty property with the intentions of building a home on it is risky, of course, but not only to the purchaser of the property. From the lender’s perspective, providing this type of loan is risky because the property in its current form is much less valuable than a typical residential property is. You will likely have to put down more than 20% for a down payment and it is likely that you will have to put down more money as the construction of your home passes through separate stages of completion and thus increase in its value.
Contact Rakhi Madan Mortgage agent to learn more.
