Constructing a home from scratch is every homeowner’s dream. Unfortunately, construction can be as expensive as purchasing a home. However, thanks to construction loans from Insula Capital building a home is asier than ever. If you’ve never heard of construction loans before, you’re in luck!
Construction loans can be the solution to all your construction financing. Don’t believe us? Let’s explore what construction loans are and how they work.
What is a Construction Loan?
As the name suggests, a construction loan is a type of short-term loan used for construction purposes. In simpler words, a construction loan covers all the costs of building a home. Moreover, it covers the cost of crafting plans, purchasing land, getting permits, and paying other expenses such as labor and materials. In addition, these loans can also be used for interest or contingency reserves.
How Do Construction Loans Work?
Construction loans allow future homeowners to borrow capital to purchase the materials needed to build a home. Moreover, the loan also pays for labor costs. This loan can also be used to buy the land you’re currently building a home on. If you already are the land’s owner, you can use the property as collateral for the loan. Construction loans are often offered for a term of 12 to 18 months because they are meant to fund the construction process. However, once construction is completed, some loans automatically switch to a permanent mortgage.
Unlike conventional mortgages, construction loans aren’t backed by a constructed home. As a result, the construction loan application and approval processes are more difficult. Before qualifying you for a loan, your lender will most likely want to evaluate your architectural drawings and assess your financial status. You’ll almost certainly be asked to submit an estimate of the construction budget and timeline.
After you’ve been authorized for a construction loan, you won’t get the entire amount in one go. Instead, your lender will offer payments to the builder in a series of installments once each stage of the construction is completed. Considering this situation, construction loans function as a line of credit. Withdrawals are planned according to the construction timetable, and your lender will send an inspector to verify the progress of the project before each payment.
You’ll only have to pay interest on the cash you’ve drawn rather than the total loan amount in most circumstances. After the building is completed, you may be able to convert the construction loan into a mortgage, depending on the lender. If this isn’t possible, you can also apply for a mortgage to settle your construction loan.
Secure Your Hard Money Construction LoansWith Us Today!
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. Ourhard money loansare 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!