Building a home takes something more than just dreaming and it is often the finances that prove to be the biggest hurdle. Construction loans play a vital role in realizing the dreams of owning a house and it is one of the most sought after loans nowadays. These are short term loans that do not prove to be a burden on the borrower and in fact turns out to be a huge asset that helps them in constructing their dream homes. Construction loans can be availed by making a simple application to the lenders or even clubbing it with the permanent financing.
Construction loans have been designed to meet the immediate financial requirements while constructing a building or house. These loans come with their distinct advantages, which includes payment of only the interest during the construction period and repayment of the principal amount only after completion of the construction. Only after the borrower takes the occupancy certificate, the construction is considered to be complete. The construction schedule determines the rate of interest of construction loans. The lenders generally charge the rate of interest based on the stage of construction. The amount of loan disbursed or approved varies from one lender to another. The lenders decide the loan amount based on the equity of the land and some other related factors.
The most important aspect of construction loans is that they are short term loans and the repayment starts only after the construction is completed. Construction of homes does not take too long and this is why the loans are short term loans whose term varies from 6 months to 1 year. There are no monthly installments repayment scheme available for the construction loans and the borrower can pay off the loan at one go after the completion of construction. Even the borrowers with bad credit can secure these loans but the rate of interest would depend more on the construction phase rather than the credit scores.
Prior to applying for construction loans, it is imperative to check the offers available from different lenders. Borrowers need not submit applications to different lenders but they just need to research online on the rates being offered for various stages of construction. An exhaustive search would result in getting hold of lower interest rates. Borrowers can even convert their construction loans into mortgage loans. Online application is the easiest way to securing construction loans without any hassles.