Building Construction Loans
Building construction loans are medium-term loans designed to finance the construction of residential or commercial buildings. These loans cover the costs of labor, materials, permits, and other associated expenses. Here are the main details and aspects of building construction loans:
- Construction-to-Permanent Loan: This loan is a combination of a construction loan and a permanent mortgage. The loan is initially used to finance the construction of the building, and once the construction is completed, it is converted into a standard mortgage with longer repayment terms.
- Stand-Alone Construction Loan: This loan covers only the construction phase. Once the construction is completed, the borrower must refinance the loan into a standard mortgage or pay it off in full.
- Owner-Builder Construction Loan: This is for individuals who plan to act as their own general contractor. These loans are harder to qualify for because the lender assumes additional risk when the borrower is managing the construction process.
- Renovation Loans: These are for individuals who want to finance the construction of an addition or major renovations to an existing building rather than building from scratch.