Construction Loan Types
When choosing between the two different types of construction loans, it’s important that you have all of the information you need to make an informed decision. While some people benefit from using a construction to permanent loan, others need stand-alone construction development loans. It can be tricky for the average person to decide what kind of loan is best for them and will meet their needs, so at Donkey Finance, we specialise in helping our customers find a construction loan for renovation or for a new construction project.
Construction to Permanent Loans
When you choose construction to permanent loans, you will immediately enjoy the benefit of only having to pay for closing once. These loans have variable interest rates that will change during construction. When you choose a construction to perm loan, you only have to pay interest on the balance due. After the build or renovation is complete, the construction perm loan will convert into a regular mortgage. You will have to compare and find the best rate to ensure that you’re not overpaying on your mortgage when this time comes.
Your other option for construction development finance
is a stand-alone loan, which is sometimes known as a construction bridge loan. While you will have to pay for two sets of closing fees and can’t lock in a maximum mortgage rate the way that you can with a construction permanent loan, you don’t have to have as much money ready for a down payment, which many people find helpful. This is great if you are going to sell your current home when your new one is completed and pay off the balance that way. There are some major benefits to construction bridge loans, but there is always the concern that you will not be able to secure a mortgage at the end of the construction process. This is especially true if your finances take a turn for the worst during construction, and this can leave you without a way to pay for your new home.
Knowing what kind of finance option is right for you tends to be rather tricky, and that’s why our customers are provided with help to make the right decision. We’re happy to talk to you about your needs and current situation to ensure that you get the right kind of financing and are able to build the home that you’ve always wanted, no matter what kind of construction loan you need.