Building your own home from scratch can be one of the most stressful yet exciting moves. However, home construction is costly, and homeowners require immediate financing to ensure a smooth process. Luckily, construction loans have helped numerous homeowners build their homes. The best part about construction loans is that they come in various types, so you can take your pick.
Let’s explore your options.
As the name suggests, construction-to-permanent loans allow individuals to borrow money to pay for their home’s construction costs. As soon as the home is completed and you’ve moved in, the loan is converted to a permanent mortgage.
Once the loan shifts, the loan has a term of 15–30 years, similar to every traditional mortgage. The top benefit of this loan is that you just need to pay one set of closing costs, decreasing the overall costs.
Like every other construction loan, construction-only loans are used to fund home construction projects. The only difference is in this loan type, the borrower’s accountable for repaying the loan at the term’s end or securing a permanent mortgage. The borrower is only held liable for interest payments on the amount acquired from these construction loans, which are disbursed based on the project’s completion percentage.
Unfortunately, these loans can be costly, especially if you require a permanent mortgage since you’d have to pay two loans and their fees.
If you’re considering remodeling your home rather than constructing one, you could weigh your home renovation loan options. Home renovation loans are available in various options depending on the capital you spend on the project. Similar to conventional mortgages, home renovation loans cover home purchasing and renovation costs. This type of construction loan is perfect for homeowners buying a fixer-upper considering investing in major home renovations.
Owner-Builder Construction Loan
This type of construction loan is like a construction-only or construction-to-permanent loan. However, in owner-builder constructions loans, the borrowers also act as home builders. Usually, most lenders don’t allow borrowers to act as their own builders since constructing a home is too complex and experience is required to meet building codes. But in some cases, lenders allow borrowers to function as their builders only if the borrower is a licensed builder.
Do you want to get in touch with a dependable private lender near you to secure your hard money construction loans? Look no further than Insula Capital Group!
Insula Capital Group is a leading private lending company offering various hard money loans. Our hard money loans are applicable for all real estate projects, such as fix and flip projects, land development, buy and hold, new construction, etc.
Get in touch with us to request a quote today!