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.
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.
In the second step, the recipient is supposed to take another loan to settle the loan. This is done to ensure that the home owner can get the benefit of having to repay relatively less during the period of the building. This encourages them to pay up faster.
There is another kind of loan plan that is called the no-interest loan. When using this plan, the borrower does not have to make any payments during the period of construction. The building goes on then when it is finished, the interests are financed and at this point the customer starts to make the payments for the loan.
One reason why the no-interest loan is recommended is the fact that the bank will charge you for only one closing fee. The closing fee is an amount of money that lenders charge their customers after they have cleared loans. This fee is supposed to cater for the information processing and the payments processing. For the first plan you have to pay this fee twice since technically you had two loans, the construction and the permanent.
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.
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.
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.
In the second step, the recipient is supposed to take another loan to settle the loan. This is done to ensure that the home owner can get the benefit of having to repay relatively less during the period of the building. This encourages them to pay up faster.
There is another kind of loan plan that is called the no-interest loan. When using this plan, the borrower does not have to make any payments during the period of construction. The building goes on then when it is finished, the interests are financed and at this point the customer starts to make the payments for the loan.
One reason why the no-interest loan is recommended is the fact that the bank will charge you for only one closing fee. The closing fee is an amount of money that lenders charge their customers after they have cleared loans. This fee is supposed to cater for the information processing and the payments processing. For the first plan you have to pay this fee twice since technically you had two loans, the construction and the permanent.
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.
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.
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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