Construction loan center is actually gaining popularity and attention amongst people. If you too are seeking to build the house of your dream especially when in need of financial assistance, then it would be wise to take advantage of this scheme. On the other hand, prior to joining the bandwagon and get a loan, it is vitally important that you have thorough understanding of the loan.
So what’s with a construction loan offered by construction loan center? Basically, this is a short term, interim loan that is used to finance the construction cost of your dream house. The credit providers or the lenders are going to secure first a mortgage over real estate property that you will be financing; then they are going to plan a periodic payment to the builder or house developer at periodic interval. And everything is happening while the work is in progress.
The construction loan center has various requirements and credit policies that they are adopting when processing the loan application. But don’t be so confused immediately since most are the same. In the next line is a list of credit providers or lenders funding the construction loan.
Number 1. These entities will be funding the amount of loan required by the client to be able to cover the entire cost of buying vacant land as well as the cost of building the property.
Number 2. Just before the beginning of the construction and if it happened that you have borrowed the vacant land already where you will be building your new house, the first loan disbursement that has been made by the construction loan center will pay off the vacant land first.
Number 3. Providers will be breaking down the amount of loan into progress payment drawdown amount. This will be made to the builder at completion of every stage of construction.
While it is true that the construction loan is virtually the same with mortgage as we know, there are of course handful of differences they have like the construction of new house should commence within 1 year of loan settlement, the construction of the house has to be done within the same year of first progress down payment, usually a short term solution with a max of 12 months, the interest is calculated against the portion of the money borrowed and been drawn down and the borrowers are expected to pay the interest during the period of construction.
Just before progressing payments made to the builder, the construction loan center will arrange everything to prepare valuations. And you must know that this will be performed from buying of vacant land, laying of flooring, installation of roofing including the frames, lock up stage and lastly, the completion stage, basically at every construction stage.