Construction Loans
Whether you’re looking at building from the ground up or just need to make a few modifications to an existing structure, a construction loan can be the best way to finance your next project. Since these loans pay out in increments, you won’t be on the hook for a large repayment if something goes wrong.
What is a Construction Loan?
A construction loan is financing meant to cover the costs of materials and labor needed to build a new property or fix an older property. Construction costs are notoriously difficult to estimate. Even if all the desired materials are available at a good price, permits and inspections can add unexpected expenses. If there’s an accident on the job or inclement weather, your new building could be put on hold.
This is where a construction loan...
What is a Construction Loan?
A construction loan is financing meant to cover the costs of materials and labor needed to build a new property or fix an older property. Construction costs are notoriously difficult to estimate. Even if all the desired materials are available at a good price, permits and inspections can add unexpected expenses. If there’s an accident on the job or inclement weather, your new building could be put on hold.
This is where a construction loan has an advantage over a large lump sum loan. In the application phase, detailed plans must be submitted to the lender. Based on those plans, the lender and borrower agree on a set of milestones. After construction starts, one milestone has to be completed before funds are released for the next phase of construction. If work stalls on the project, the borrower is only responsible for repaying the milestones that have already been funded, not the full loan amount.