Interested in building an additional home on your current property? Maybe you want to modernize your home by adding a few extra rooms. You are going to need financing if your cash isn’t sufficient enough to pay for labor and materials. Even if you can do so comfortably, you’ll receive more leverage by educating yourself, structure your construction finance to secure the best possible financial outcome and obtaining the best construction loan for your project. Only apply for loans with low interest rates and minimal to no collateral requirements. Once you find this loan, take these very wise steps to get your funding approved immediately.
Develop a Plan
Come up with the design plan for your project, and calculate the cost accordingly. When the proposition is intact, show it to several lenders until you come across one who will fund you. Financiers are friendlier when you can show them a plan for every dollar they hand you.
Do the Work in Sections
The less you do, the less you will need to borrow. Banks and other lenders are more likely to fund borrowers when they are not asking for huge dollar amounts. You can divide the task in four phases and borrow as needed, but you should pay some of the loan early just to gain the lender’s trust.
Give the Lender a Payback Date
Every financier is comfortable with a borrower who can give them an actual payback date. If you perfect a plan, you can minimize delays and avoid troubles to meet your objective. Use a promissory note because this form contains the proper wording for predicted agreements. Make sure you settle up before the deadline so you can use the lender for future projects.
Get an Outside Investor
If you can secure finance for construction from an independent investor, lenders will view you as a formidable individual. No one will lend you money unless they trust you to handle the job and pay them back. Use the investors money as equity towards the total cost of your project. When the bank reviews your plan, they will likely approve your request because you showed initiative by acquiring some of the funding on your own.
Use Your Home Equity
Some lenders will require you to put up 10 - 20% of your home equity against the loan. This is a form of collateral, but it is not a physical asset that you must surrender. By putting your equity against the loan to make improvements, you can actually benefit from the mortgage payments you made over the years.
If you please the lender, you will set yourself up to receive the lowest construction loan rates. With excellent preparation you can receive substantial funds for your property development.
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