How Construction Loan BC Options Are Expanding Through Private Mortgage Funds?

 

Construction loans are used to build a residential dwelling (a.k.a. stick-built home) from the land acquisition to the completed structure. Various types of construction loan BC options exist. Some will convert to a permanent mortgage upon completion of construction. Others may only finance the construction portion.

Construction loans explained

Prior to construction starting, you (or your housebuilder) will need to provide the lender with information including a realistic timeframe, a detailed plan of construction and a budget for the project. You’ll need to keep lenders updated on your progress as you go.

Unlike traditional loans, construction loans provide money in stages. During each phase of the construction process, your lender will likely require a qualified inspector to assess the work completed thus far. If everything is on track, they will send another payment (known as a “draw”) to your builder so they can continue work.

Construction loan repayment terms are usually up to 12 months, giving you time to finish construction of your home. During the construction period you’ll usually only make interest-only payments. Another benefit is you’ll only pay interest on what you’ve borrowed so far.

4 types of construction loans: Which is right for you?

1.     Construction-only loan

Also known as a delayed financing loan, a construction-only loan only funds the building of the home. When the home is completed, the entire loan amount will become due. Most borrowers pay the remaining balance in cash or through a second mortgage. These loans can be more expensive and take longer, since you must undergo the mortgage process twice and pay two sets of closing costs.

2.     Construction-to-permanent loan

A construction-to-permanent loan is similar to a construction-only loan, but it converts into a Private Mortgage Funds when the house is completed. With this type of loan, the buyer only has to fill out one application and pay one set of closing costs.

3.     Renovation or rehabilitation loan

The renovation loans can be a kind of construction loan which is used to finance major renovations to a house. These could include improvements like additional rooms, garages or a swimming pool. Rehabilitation loans also fund major improvements, but they're intended to restore a home to a livable condition.

4.     Owner-builder construction loan

If you're either a general or a professional builder who is looking to construct your own home, you may look into financing your build by obtaining an owner-builder construction loan. as the owner, you'll be responsible for the construction as the builder, and providing your lender with the necessary information for the building process.

Example timeline: What to expect from a construction loan

Every construction loan won’t adhere to this exact timeline, as yours will vary based on the unique needs of your project. However, a construction loan can generally expect to follow this pattern.

Keyways Mortgage works to learn about your construction project’s goals, budget and timeline. Needing to build a dream home? Renovate your current property? Develop land? Each construction project is unique The extra effort could be a better solution to time and stress for the person applying.