- What is an interim construction loan?
- For many Americans, designing and building their own home is a long-time dream. For this dream to become a reality, however, you’ll likely need an interim construction loan.
- Unlike a traditional mortgage, an interim construction loan is a short-term loan that lasts only as long as it takes to complete the construction. During this time, the lender will closely monitor the construction process and give you money in chunks to complete the project.
- Paying off the loan
- During construction, you’ll only need to pay interest. You won’t start paying off the loan until after construction is complete, when you’ll transition to a traditional mortgage.
- Because interim construction loans are riskier investments, you’ll likely need to pay higher interest rates than you would for a traditional mortgage.
- Can I get an extension on a construction loan?
- Most lenders understand that construction projects can easily become delayed.
- If you need an extension, you’ll likely only need to pay a small fee. However, if you’ve secured a low mortgage rate after construction ends, an extension could put that at risk.
- What if I go over budget?
- Going over budget is another common issue. If you have a one-time close loan, the loans for the construction and the mortgage are wrapped into one. As a result, you would need to pay for any additional construction costs out of pocket.
- If you have a two-time close construction loan, you will refinance your construction loan once construction is complete. This means that you’ll be able to cover any additional expenses by raising the mortgage amount.
To learn more about finding the right interim construction loan for your needs, contact United Credit Union.
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