Want to build a new home or renovate? Construction & Land Financing
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When looking to build a new home or renovate your current property good decisions need to be made when it comes to money. Ultimately, financing is one of the biggest decisions you will make because, if done incorrectly, you could be left in debt for many years to come. Construction financing is a short-term arrangement made to finance any real estate related projects.
To get started, the home or land owner will take out the loan to cover all the related costs of the project and this helps to get started before a more permanent source of funding becomes available. At the end of the project many people chose to refinance the construction loan into a permanent mortgage with one of the big banks. For the lending company, construction loans have more risk than regular loans so the interest rates are generally much higher.
Construction loan
At the very least, a 20% down payment is normally required from most lenders on the loan along with blueprints, architectural drawings and detailed project plan.
A typical construction loan will last for around 12 months. During this time, only the interest payments will be necessary. If you are building a new home whilst living in another, you don’t necessarily have to sell first because of this 12-month period. Rather than moving twice, the loan allows you to stay in your existing home while the building company works on your future home. Then, you can move in upon completion and sell in the same window.
Flexible service at an affordable price !
As you can imagine, there are several variables within this process such as the builder you choose, the value of the property, the value of the work being done, and more. However, we can help you with whatever you may need.
We realize that building your home is an exciting time so we offer a flexible service at an affordable price. Once you contact us, we will work towards a tailor-made financial solution to help make your dream come true!
The loan will cover any costs that are directly related to the building work being done so this means labour as well as the raw materials. Without either of these two factors, the construction cannot start so these are both essential to your project.
These are the costs that are indirectly related to the project which means that they arise as a result of something else. For example, this could include engineering fees, permit fees, and architectural fees. If the cost doesn’t directly relate to the contract but it does enhance the project somewhat, it falls into this category.
Generally, you will find that an extra 10% will be added on top of the construction costs as a contingency account. At times, orders will need to be changed or upgrades are required so this contingency amount is highly recommended. If you find that it doesn’t get used by the end of the project, at least you had it there for security and peace of mind.
After the actual construction, you will probably need items in the home or extra room such as flooring and other products to make it ‘livable’.
Taking all of the previous categories we have discussed in mind, you will come up with a total cost for the entire project. When the company is deciding how much you can borrow, they will take the lesser of the total costs or the appraised value.
Lot equity may also be found and this is the difference in value between the loan to be paid off for the land and the appraised land value itself. Any difference will be credited towards the down payment.
Which Costs are
Covered?
Land Value
At the start of the project, you might want to cover the purchase of the land and this can be done with construction financing.
How do I Apply?
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Frequently asked questions that can help you start your mortgage journey with us.
Contact Benson Mortgages specialist.
We offer a broad range of services to cater to different financial needs. Our services include residential mortgages for those looking to buy a home, refinancing for those who want to take advantage of better interest rates or terms, and transfers & HELOC for homeowners who want to leverage their home equity. We also provide private mortgages, 1st, 2nd & 3rd mortgages, reverse mortgages for seniors, commercial financing for businesses, and construction & land financing for developers.
A residential mortgage is a financial product that allows individuals to purchase residential property. The property is used as collateral for the loan, which is repaid over a specified period up to 40 years or interest only. The borrower makes regular payments to the lender, including the principal amount and interest.
A fixed-rate mortgage has an interest rate that remains the same throughout the loan term, providing stability and predictability for your payments. On the other hand, a variable-rate mortgage has an interest rate that can change over time based on market conditions. This means your payments could increase or decrease. The choice between the two depends on your financial situation, risk tolerance, and market expectations. There is also a variable rate mortgage with a fixed payment.
Refinancing a mortgage involves replacing your current mortgage with a new one, often with different terms or a lower interest rate. Refinance can be a good idea if you can secure a lower interest rate, and want to change the term length of your mortgage. You might need to access equity in your home in order to pay out debt, buy investment property or any other investments, pay for your kids' school or to renovate your home.
Secured Line of Credit is a type of loan that lets you borrow against the equity in your home. It works much like a credit line, where you have a credit limit and can borrow as much or as little as you need up to that limit. You only pay interest on the amount you borrow. It can be used for various purposes, such as home improvements, debt consolidation, or even to fund a business venture.
A private mortgage is a loan provided by a private entity or other financial institution, such as an individual or a business, rather than a traditional bank. People often choose private mortgages when they have unique financial circumstances that make it difficult to qualify for a traditional mortgage, such as being self-employed or having a less-than-perfect credit history. Private mortgages offer flexibility and can be customized to meet the borrower's needs. Private mortgages are used for the properties that do not meet banks criteria: land, properties under construction, agricultural properties, sub-divisions, etc
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