Construction Loans - Helping You Build Your Home

By Mark Bonders for mortgage-and-loan-info.com

Construction loans are loans you can avail of for the purpose of financing the construction or building of your home. Many people are finding out that building their own homes are less expensive than purchasing a new one. Apart from this, many cherish the aspect of being able to own a home that has been built according to their specifications.

A construction loan is considered a short-term loan and as such general short-term interest rates apply. If you've already contacted a lender, ask about applicable interest rates and use an online loan payment calculator to verify if you can make the necessary loan payments.

Note that a construction loan is not the usual apply and fill out an application form loan. Lender inspection is usually part of the lending process and you, the lender and the house contractor need to draw up construction milestones which are often tied to dates when the lender releases money to finance that stage in the construction process.

A construction loan is usually an interest only type of loan with the full amount made due upon completion of the home, which is usually signified by you getting your certificate of occupancy. If you think that you cannot settle the construction loan in full after completion of your house, it might be worthwhile to discuss a construction-to-permanent financing loan with the lender.

If you convert your construction loan to a mortgage loan, note that the lender may apply higher construction loan interest rates. On the other hand, it takes away the headaches of dealing with yet another lender once construction is finished. You might even get away with better mortgage rates since the lender knows you already.