Updated: Mar 23
A residential construction loan could provide the necessary funds if you're considering building your property. However, it's important to note that these loans differ from regular mortgages and have specific characteristics you should consider before filling out loan applications.
As you search for a residential construction loan, you'll find many options from banks and financing companies. It's important to choose one that suits your needs.
For example, you'll act as the general contractor if you opt for an owner-builder loan. You will ensure the construction is completed on time and within budget.
If you're considering owning your own home, you may face the challenge of its high cost. Only some people have enough money to purchase a cash home. In this case, a residential construction loan can be a great solution.
If you're looking to get a construction loan, it's a wise idea to pre-qualify for it. During the pre-qualification process, the lender will consider factors such as your credit record, any down payment you can make, the type of loan you want, and the home's current market value. By pre-qualifying, you'll be able to determine the amount of home you can afford to finance and build.
When finding the right loan for your needs, choosing a mortgage broker who can help you navigate the process is important. The mortgage broker will be able to guide you through the terms and conditions of each deal so you can choose the one that works best for you.
As you explore construction loan options, you'll find several types available. Some loans are based on a six-month or one-year plan, meaning the construction will be completed within that time. Other loans may allow you to lock in your interest rate at the lowest rate, while others may have a variable interest rate that changes with the market.
If you're building a new home, consider a construction loan known as a bridge loan. This loan allows you to use equity from your current home until your new one is completed. With many bridge loans, you'll only be required to make interest payments until the house is finished, at which point those payments will become due.
Once you've discussed everything with your mortgage broker, you'll be better positioned to evaluate your financial situation.