Whether you’re building your dream home or have plans to invest in another new property from the ground-up, you’re going to need a way to finance that dream.
Unlike a traditional home mortgage used to purchase an existing property, you’re going to need a loan that helps you with getting the new build started. This typically comes in the form of a construction loan. For new builds and investors, there are many benefits to this type of loan.
Here’s a closer look.
What Is a Construction Loan?
One way to think about a construction loan is as a “self-build loan” that you receive quickly for the purpose of building a home, adding to an existing one or for another real estate project. While waiting on the long term funding for the project, the loan will pay to get it started and building underway quickly.
There a 3 types of construction loans:
- Construction-only – These loans are given for the building phase and must be paid off in full when the project is done. It’s a fast way to get cash when you know the return profit will be quick.
- Construction-to-permanent – This loan type is for those projects with set plans and timelines the builder will receive loan payouts as they are working and once the construction project is done it is converted into a mortgage.
- Renovation construction loans: This is used specifically in the purchase of a fixer-upper property. These loans will consider factors such as government programs, costs and the price you paid for the property.
The different types of construction loans available to buyers can be beneficial to their situation when it comes time to get started on a project and you want to do so right away. The short term of these loans and quick access to funds makes it possible to get builders and materials paid for so the construction can begin and be completed fully.
Deadlines, whether your own personal goals or those required to fulfill an agreement are important reasons to seek a construction loan. These loans are a great way to ensure you can meet quick timeline goals. Because funds begin to be released immediately in most cases, you don’t have to worry about getting tied up in red tape or document hold-ups that can happen in a new build process.
Sachem Lending provides innovative financing solutions for challenging and hard-to-fund loans and everything in between! We offer personal and responsive service that meet your financial requirements.