The dream of buying a new home needs to be supplemented with a lot of research and finance. This involves borrowing money from institutions like banks or housing finance companies. A number of loans are being offered for the purpose and as the name suggests, Construction Home Loans provide financing for the construction of a new home. The loan is beneficial when taken for building a new home, investing in new home or renovating the existing home.
If you are planning to build a home or renovate the existing home, Construction Home Loans can suffice all the financial requirements. However, it is advised to have an extensive research done before applying.
Facts
A construction home loan requires the lender to know about the story behind the construction of the house, before sanctioning the loan. Hence it is also known as a story loan. It requires interest-only payments during construction and the principal payment is made only upon completion. The interest rates of the loan are variable and decided on the basis of stages of construction of the house. The land owned for construction of the home is considered as equity on the construction loan.
Home construction loans are short term loans ranging from six months to 2 years and need to be repaid upon the completion of construction. However, there is an option of opting for the construction-to-permanent financing program where the loan is converted into a mortgage loan once the certificate of occupancy is issued.
It is advised that an extensive research be done on the loan program, different banks and finance companies offering loans, the rate of interest charged and the mode of repayment, before applying for loans.
