New Home Construction Loans
Loans for new home construction are distinct from those for the purchase of pre-existing homes or what is known as a refinance. Mortgages that are used to buy already-built homes use the house as collateral to secure the loan. If you don’t make the mortgage payments on time, the bank will take possession of your home and sell it to recoup the loan cost.You may want to check out startup funding mississauga for more.
Since the house is still being constructed, there will be no home to use as collateral with a new home construction loan. In any case, the bank will take your word for it when it comes to repaying the loan. It would be nice if banks would only take your word for it, but when hundreds of thousands of dollars, if not millions, are on the line, John Smith’s signature isn’t enough for the bank to simply hand over a check for you to start building.
The lending process for a new home construction loan is more rigorous due to the complexities of the home building process. A timeline will be outlined once the lender has approved you for a new home construction loan. The lender specifies how the loan will be disbursed in this draw schedule.
New home construction loans are usually disbursed in 25% instalments. When you have completed 25% of your building, the lender will give you 25% of the loan sum. A progress assessment is required by the lender to ensure that the work has been completed.
You will not be required to make any payments on your new home construction loan until the initial disbursement has been made. Just interest payments will be due on the loan by that time, and the good news is that you will only be responsible for the portion of the loan that has been disbursed.
The more you build, the more your debt is disbursed, and your monthly payments will rise as a result. This is because you are paying interest on a large sum of money each time a disbursement is made. When you finish building your new home, the whole balance of your construction loan will be due.
CONTACT INFO :
E2E Financial Solutions
4287 Village Centre Ct Suite 301, Mississauga, ON L4Z 1S2
Phone No. :16478314742