A building loan is a financial credit that is offered to house owners by banks and other financial institutions to help them pay for building of their homes. The main aim of this construction contract financing loan is to help people pay up the builders as soon as possible then they can sort out the payment later. One can take this kind of loan for building house or to cater for expansion costs a new
The loan is made up of two steps. This allows the home owner to have some benefits. The first step is where the bank lends the money to the home owner. The home owner can withdraw this money at will to help them cover building costs along the course of the process of building period. At this step the owner can make some interest only payments to the lender up until the time when the building is completed.
The second step is the repayment stage. At this step all the remaining balance on the money that was issued is moved to a permanent loan by the financial institution. This is when the recipient of the loan starts making payments. The interest fees are as per the negotiated rates.
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.
The second type of plan is the best to choose. One advantage of this loan plan is that you only have to repay one closing fee. This is a fee that the bank charges you once you have completed paying up a loan. This covers for all the cost of processing your payments. If you take the two step plan, you will have to pay the closing fee for the construction loan and another closing fee for the permanent loan.
An added advantage of using the no-interest building loan is that the interest you pay will be lower. This is because there is no interest imposed during the building period. As opposed to the two step loan where the interest still rises even during the period of construction. This means that if you take a long building period, the interest that you will pay should be higher.
An advantage of taking either one of these loans is that you will have a very smooth building period. This is because there shall be a steady flow of funds in case you need to buy any building materials. The funds will be there. The builders payments shall be paid on time due to all this, the entire process will be faster and smoother for the builders.
Finally, after looking through all this advantages it is clear that this loans are a good way to get your building up. You just need to be wise about your loan plan. You can have your construction started as soon as possible.
The loan is made up of two steps. This allows the home owner to have some benefits. The first step is where the bank lends the money to the home owner. The home owner can withdraw this money at will to help them cover building costs along the course of the process of building period. At this step the owner can make some interest only payments to the lender up until the time when the building is completed.
The second step is the repayment stage. At this step all the remaining balance on the money that was issued is moved to a permanent loan by the financial institution. This is when the recipient of the loan starts making payments. The interest fees are as per the negotiated rates.
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.
The second type of plan is the best to choose. One advantage of this loan plan is that you only have to repay one closing fee. This is a fee that the bank charges you once you have completed paying up a loan. This covers for all the cost of processing your payments. If you take the two step plan, you will have to pay the closing fee for the construction loan and another closing fee for the permanent loan.
An added advantage of using the no-interest building loan is that the interest you pay will be lower. This is because there is no interest imposed during the building period. As opposed to the two step loan where the interest still rises even during the period of construction. This means that if you take a long building period, the interest that you will pay should be higher.
An advantage of taking either one of these loans is that you will have a very smooth building period. This is because there shall be a steady flow of funds in case you need to buy any building materials. The funds will be there. The builders payments shall be paid on time due to all this, the entire process will be faster and smoother for the builders.
Finally, after looking through all this advantages it is clear that this loans are a good way to get your building up. You just need to be wise about your loan plan. You can have your construction started as soon as possible.
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