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
This loan can exist as a two-step component. In this case, the first step is the actual money that you are supposed to use to fund your building. This money can be withdrawn by the house owner on a need basis depending on the different stages of construction on is in at the time. In this step, interest only payments are made to the lender of the loan once the building is completed. The entire balance becomes payable.
During the second step, the loan changes state to a permanent loan and the entire sum of the balance is payable with the agreed upon interest rate. This allows the home owner to pay less interest during the construction period. The benefit here to the bank is that the recipient will be encouraged to pay faster in order to avoid interest.
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.
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.
Another advantage of this second mode of taking up a building loan is that your interest starts to increase when your building is finished. As opposed to the two step method where the interest is rising even during the period of building. This helps you save a lot since if your building takes a long time while using the first kind of loan, you will have to pay much more interest but in the no-interest building loan, there is no interest during the time of building.
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.
Having this type of loan shows you that the financial institutions are willing to help you fund your building projects. With this in mind you should really consider this kind of funding when you are about to build or do a major renovation.
This loan can exist as a two-step component. In this case, the first step is the actual money that you are supposed to use to fund your building. This money can be withdrawn by the house owner on a need basis depending on the different stages of construction on is in at the time. In this step, interest only payments are made to the lender of the loan once the building is completed. The entire balance becomes payable.
During the second step, the loan changes state to a permanent loan and the entire sum of the balance is payable with the agreed upon interest rate. This allows the home owner to pay less interest during the construction period. The benefit here to the bank is that the recipient will be encouraged to pay faster in order to avoid interest.
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.
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.
Another advantage of this second mode of taking up a building loan is that your interest starts to increase when your building is finished. As opposed to the two step method where the interest is rising even during the period of building. This helps you save a lot since if your building takes a long time while using the first kind of loan, you will have to pay much more interest but in the no-interest building loan, there is no interest during the time of building.
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.
Having this type of loan shows you that the financial institutions are willing to help you fund your building projects. With this in mind you should really consider this kind of funding when you are about to build or do a major renovation.
