Building loan is a loan that you as a prospective owner take from a financial institution like a bank in order to pay a builder for their building work. You can take a loan to cater for building of an entirely new structure or you can take another kind of loan to pay for modifications or extensions to an already existing house. This can also be called construction contract financing.
This loan consists of two steps. In the first step, the lender offers the loan to the building owner who can withdraw the money at will depending on the different stages of building. This means that the recipient can comfortably handle all the charges of the construction since there is money from where they can withdraw.
During the second step, the loan changes state to a permanent loan and the entire sum of the balance is payable with the agreed upon interest rate. This allows the home owner to pay less interest during the construction period. The benefit here to the bank is that the recipient will be encouraged to pay faster in order to avoid interest.
Another loan plan involved in construction loans is one that is called the no-interest loan. In this kind of loan, there are no two steps. The home owner simply borrows a loan from the bank and uses the loan to cater for building costs. After the building is all finished, the interest is calculated and they start making payments at that point.
An advantage of using the no-interest construction loan is that you will incur less extra costs from the bank. You will pay only one closing fee. The closing fee is an amount of money that the bank charges you when you have just cleared a loan. It is supposed to pay for the cost of all the information and payments processing that took place while you were making payments. For the first plan you have to pay for both the loan and for the permanent loan.
Another advantage of this second mode of taking up a building loan is that your interest starts to increase when your building is finished. As opposed to the two step method where the interest is rising even during the period of building. This helps you save a lot since if your building takes a long time while using the first kind of loan, you will have to pay much more interest but in the no-interest building loan, there is no interest during the time of building.
Using a construction loan is a good thing; this is because it allows you to have a constant flow of money during your building process. This means that builders payments are not delayed and the money is there if you need to buy more supplies. This in turn speeds up the whole building process of your house.
There are very many ways you could look at these kinds of loans. You could see the bright side which is the convenience that they bring. You could also look at the other side of the coin which is the interests and bank payments you incur.
This loan consists of two steps. In the first step, the lender offers the loan to the building owner who can withdraw the money at will depending on the different stages of building. This means that the recipient can comfortably handle all the charges of the construction since there is money from where they can withdraw.
During the second step, the loan changes state to a permanent loan and the entire sum of the balance is payable with the agreed upon interest rate. This allows the home owner to pay less interest during the construction period. The benefit here to the bank is that the recipient will be encouraged to pay faster in order to avoid interest.
Another loan plan involved in construction loans is one that is called the no-interest loan. In this kind of loan, there are no two steps. The home owner simply borrows a loan from the bank and uses the loan to cater for building costs. After the building is all finished, the interest is calculated and they start making payments at that point.
An advantage of using the no-interest construction loan is that you will incur less extra costs from the bank. You will pay only one closing fee. The closing fee is an amount of money that the bank charges you when you have just cleared a loan. It is supposed to pay for the cost of all the information and payments processing that took place while you were making payments. For the first plan you have to pay for both the loan and for the permanent loan.
Another advantage of this second mode of taking up a building loan is that your interest starts to increase when your building is finished. As opposed to the two step method where the interest is rising even during the period of building. This helps you save a lot since if your building takes a long time while using the first kind of loan, you will have to pay much more interest but in the no-interest building loan, there is no interest during the time of building.
Using a construction loan is a good thing; this is because it allows you to have a constant flow of money during your building process. This means that builders payments are not delayed and the money is there if you need to buy more supplies. This in turn speeds up the whole building process of your house.
There are very many ways you could look at these kinds of loans. You could see the bright side which is the convenience that they bring. You could also look at the other side of the coin which is the interests and bank payments you incur.
No comments:
Post a Comment