Why You Should Consider New Construction Loans
Construction loans can make the debt more accessible for those that need it. New construction loans are a form of lending created to finance the construction or renovation of buildings and other structures. Many lenders focus on these lending products, and they typically offer financing options with longer loan terms than traditional mortgages. These lenders can be found nationwide in most areas, so there is no need to find one nearby. With borrowers looking for better ways to fund their projects, borrowing from a construction lender might be an option worth exploring more seriously.
New Construction Loans are also more flexible than other types of loans and can be used to pay for any combination of the following:
- Construction (not including architecture)
- Landscaping (not including plants)
- Roofing & Siding
- Add-ons & Kitchen Renovations.
How do New Construction Loans work?
Construction loans are made in two or more specific phases with a particular amount of money. The primary purpose of these loans is to provide the borrower with enough money to complete the project. These phases are as follows:
Initial Construction Phase: This is typically the first phase of construction. It can be used to fund all costs required to start a project, including design and engineering work, as well as labor and materials. Funds are typically given out over time, and the amount given out can fluctuate.
Pre-Construction Phase: This is known as construction financing or "pre-construction." This step is used to provide the borrower with money before construction begins. This includes design and engineering work, as well as labor and materials. This phase can be used to pay for the cost of construction projects, which may be applied to additional stages if construction costs are not fully covered by initial funds given out.
Construction Phase: This is what is known as "construction." This is when real work occurs on a project, and any funds given out during the pre-construction phase are applied towards paying off the project. This can be a time-consuming process and take a long time to complete.
Post Construction Phase: Everything has been completed, and all construction has ceased. This can include additional costs, such as landscaping, but only if needed for another use of the property or structure.
Who can obtain a New Construction Loan?
There are a variety of investors, developers, and businesses that can use construction loans. These individuals can use the money to make their projects more appealing to potential customers and improve their current business. New construction loans are available to private business owners and anyone who needs to borrow money for their personal needs.
These loans are helpful for anybody trying to make a project happen. From individuals looking for funding for their projects to businesses in need of funds to renovate their office space, new construction loans can be used in many different ways.