Renovation/Construction Loans

Are you building or renovating a home? Consider a short-term construction loan.

One key difference between a conventional mortgage and a construction loan is that rather than lending the entire balance of the loan at one time, a construction loan pays a series of advances, more commonly called “draws,” as the home is built.

Construction loans for renovations or remodels of a current home are more commonly called renovation or home improvement loans, and involve major changes to an existing structure.  A construction loan can be used to purchase land and build a home, or construct a home on land the borrower already owns. A borrower can also place a manufactured home on land with construction financing.

During construction, you typically make interest-only payments on the balance of the money drawn. The loan is designed to pay the contractors and subcontractors who build the home in regular installments, usually based on how much of the work has been completed at each stage of construction.

Once the work is done, the loan is paid off or converted into a “permanent” loan, which works like a conventional mortgage, with payment of principal and interest until it is paid off or the home is sold.

This seems a bit complicated, but it’s not. We can help you with these types of short-term loans.