If you’re familiar with traditional mortgages, then understanding a construction loan will not be too difficult. If you’re building or renovating your home as opposed to buying it outright, the bank will issue you a construction loan. While mortgages are based on the predetermined and fair market value of an existing home, construction loans are a bit more speculative. Their total amount is based on how much the finished construction is projected to be.
As one of the top home remodeling contractors in the area, Design Build Remodeling Group has earned the trust of Maryland homeowners because of our quality services and our affordable financing options, and we can help you to fund the renovation project of your dreams, too.
Types of Construction Loans
Generally speaking, construction loans carry higher interest rates than most other types of bank loans, but this is balanced by a much shorter repayment period. These loans usually fall under three main categories.
Renovation Construction Loans
If you’re buying an existing home that requires a considerable amount of work, then this is the type of loan you would want. This doesn’t mean you have to start from scratch, but it does mean you expect to do a complete overhaul of an almost unusable house.
The repayment period of construction-only loans is dependent on the schedule of the whole project itself. Typically, most banks expect a full repayment once the construction is completed. If you are selling your previous home, and you’re confident that the amount you’ll make can cover the costs of a brand-new construction, then this is the type of loan you need.
Like a construction-only loan, a construction-to-permanent loan can be used to fund a whole home construction. The only difference is that the balance becomes a mortgage once the project is completed. One advantage of this type of loan is that you’re able to lock in your interest rate when you’re closing, eliminating the stress of dealing with variable payments.
Design Build Remodeling Group is your number one provider of design and construction services for all your remodeling needs, including whole-home additions and renovations. Give us a call at (443) 230-4070, or fill out our online contact form to get your dream project started today. Our services are available in Eldersburg, MD, and surrounding areas.