Your financial or employment circumstances may have changed over the course of construction which may make it more challenging to qualify for the permanent mortgage. The downside to a construction loan is that you have to apply for the permanent mortgage after the construction is complete. Instead of arranging two separate loans it typically saves the borrower money and time to obtain a construction to permanent (C2P) loan which enables you to finance construction or renovation costs with one mortgage instead of two If the construction loan lender does not provide permanent mortgages they usually require that the borrower has arranged a lender to provide the permanent mortgage before finalizing the construction loan. In many cases the construction loan lender also provides the permanent loan. When the property construction or renovation is completed the borrower pays off the construction loan typically by refinancing it with a permanent mortgage. Please note that the outstanding principal balance of the mortgage is not reduced with an interest only mortgage. Although the interest rate on a construction loan is typically higher than the interest rate on a regular mortgage, the mortgage payments are lower because the borrower only pays interest. Most construction loans are interest only mortgages so the borrower pays only interest and no principal over the course of the mortgage. Construction loans are typically six months to a year in length depending on the schedule to build or remodel the property. A construction loan is a short-term mortgage that enables a borrower to finance the cost of building a new home or significant renovations including for a tear-down or fixer upper.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |