Introduction to Construction Home Loans

by como ·

The article explains what a construction home loan is, the manner in which the monies are released and other characteristics of a construction home loan.

If you are planning to buy land and then build your dream house based on your own customized and specific requirements, then a construction home loan is something that is likely to suit you the best. Since the actual construction can take considerable time, you are not likely to need all the money that you are planning to invest in building at one go. It is therefore wise to choose construction home loan as the option that allows you to withdraw the loan amount in phases, as the building is completed.

In most cases, a construction loan is divided into five phases. These are typically purchase of land, completion of flooring, completion of the roof, lock up and final. You may need to specify the home loan option that you would want to revert to once the five phases are complete and the entire amount of the construction home loan has been withdrawn.

While the interest rates charged on a construction home loan tend to be slightly higher than a variable home loan, the overall package works out better since you are only pay interest on part of the construction home loan that you have withdrawn. To avail of a construction home loan you will need to provide proof of council approved plan for a fixed price contract for the building. Most builders are happy to provide this in a phased manner so that the construction loan payment releases can be scheduled.

At the completion of each stage, a real estate valuer assigned by the construction home loan lender shall visit the property to guarantee the stage of completion. In case of a delay in schedule or unforeseen payments, you can apply for a line of credit for the construction home loan, if need be. Mel writes about construction home loan among other finance related topics.

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