Construction Loans
Construction loans offer customized financing to help you build property. Funding can go toward brand-new construction or the renovation of an existing structure. These loans pay out incrementally over time, usually based on construction milestones. Typically, borrowers will convert the loan to a traditional mortgage once the project is completed.
Overview
Rather than buying an existing property, sometimes it’s better to build a new one. However, the cost of procuring the land, setting the foundation, and raising the building can be prohibitively expensive for many businesses. In that case, a construction loan may be the best financing option available.
What makes real estate construction loans so unique is that they do not provide a lump sum upfront. Instead, the lender will work with the borrower to develop a payment plan based on construction details. As the project reaches certain milestones, such as securing zoning permits, the lender will issue payment on the next stage of the loan.
To qualify for a construction loan, the company must have excellent credit and a strong payment history. Also, many lenders will require input from various construction personnel, including the architect and the foreman. These individuals will assess the financial need for each stage of the project so that the lender can issue enough funds to cover them.
During the loan, the borrower will only make interest payments. This format ensures financial stability, as the borrower doesn’t have to pay off the balance until the project is complete. Best of all, most lenders will convert the loan to a term or permanent mortgage, which can save the company the burden of repaying the full principal at the end.
What makes real estate construction loans so unique is that they do not provide a lump sum upfront. Instead, the lender will work with the borrower to develop a payment plan based on construction details. As the project reaches certain milestones, such as securing zoning permits, the lender will issue payment on the next stage of the loan.
To qualify for a construction loan, the company must have excellent credit and a strong payment history. Also, many lenders will require input from various construction personnel, including the architect and the foreman. These individuals will assess the financial need for each stage of the project so that the lender can issue enough funds to cover them.
During the loan, the borrower will only make interest payments. This format ensures financial stability, as the borrower doesn’t have to pay off the balance until the project is complete. Best of all, most lenders will convert the loan to a term or permanent mortgage, which can save the company the burden of repaying the full principal at the end.
Loan Highlights
- Construction loans can be used to build new structures or to update existing ones.
- Loans will offer immediate financing to start zoning and permitting. From there, builders have to submit payment requests to get more money after each stage is complete.
- These loans require much more planning to get approved, as well as excellent credit history.
- Most lenders allow borrowers to convert the loan to a mortgage once the project is finished.
Pros
- Borrowers don’t have to repay the loan until the building is complete.
- Loans can be converted to a mortgage to offset a balloon payment at the end of term.
- Because funding is issued at milestones, delays in construction aren’t as risky.
- In some cases, it can be relatively easy to qualify for a construction loan, as long as the borrower’s credit history is strong.
Cons
- Construction loans can be more complicated than other financing options.
- Interest rates for construction loans are relatively high.
Apply Today
Begin your path to funding with a simple, informational application.
Contact Info
Address: 5340 S Verde, Mesa AZ 85212
Phone: 623-230-7528
Email: Contact@revitalcap.com
Copyright @ 2020 Revital Cap. All rights reserved. Powered by CLBI