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Posted on August 1, 2018 - 11:04 AM
by James and Denise Orrico
Here’s some financing options when you decide to build a new home.
Financing a new construction requires two types of loans; a construction loan and an end loan.
What’s the difference between the two loans?
This type of loan is used to finance new construction by either a builder or a homeowner. Historically the agreement is for 6-24 months depending on the size of the building project. The buyer is given a “Line of Credit” which has an adjustable rate on the total amount to cover the cost of building. When the construction is finished, the bank will call the loan “due in full” which will then require an end loan.
· Loan is based on a variable rate attached to Prime
· Draws are requested as work is completed to pay the builder or contractor
· Payments are applied to interest based on your current balance
· The balance is due in full once construction is completed
The end loan is really a refinance and the buyer will select a program that meets their needs such as a 10 to 30 year fixed rate or an ARM.
· Refinances the construction loan into a secured mortgage
· Fixed or Adjustable mortgage rates