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Construction Loans – How to Buy and Build A Home with a Single Loan in Robbinsville NJ.

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Mortgage and Lending with TD Bank 466521

 

Construction Loans – How to Buy and Build A Home with a Single Loan in Robbinsville NJ.

The tides are definitely changing. The appeal of single construction mortgages is on the rise, as they now give homeowners the incentives of building their dream home with a single mortgage. With a construction loan, home owners can not only add luxurious amenities like swimming pools but also transform their properties onto stunning vacation homes. Major renovations such as adding an extra room or upgrading with an extension is also possible through a decent construction loan.

So, What Exactly is a Construction Loan?

Construction loans are short term financing options that can cover the building costs while the construction in the home is in progress. The demand for these loans is steadily increasing, particularly because of the lack of inventory in most markets. Instead of choosing from the limited number of choices, a lot of people go for the more viable option of building their home and enhancing its value.

Why is the Demand for Construction Loans Rising?

Mostly when homeowners need to expand their property or build their own home, they go for contractors who have their own financing to carry on the construction. At the end of the job, the homeowners can opt for a standard home mortgage. But it often happens that these specialty contractors don’t have front end financing of their own. In these cases, going for a construction loan is the only choice available. 

Types of Construction Loans!

There are different types and variants of construction loans, but the most popular of these is the construction-to-permanent loan. This loan covers all the building costs and then converts into a normal mortgage loan after the construction is completed.

The main advantage of this kind of loan is that it has one application and one closing, and it acts like a line of credit during the entire construction phase. It provides the borrowers with the cash inflow that they need, and only the interest amount needs to be paid during the construction period. Once that is finished, the borrower can proceed with the interest as well as principal payment.

However, despite all the advantages there are a few setbacks that make these loans a little difficult to handle.

Getting an Appraisal:

Construction loans are usually approved after an appraisal by the lender. This can prove to be a disadvantage if other homes in the market are of a lower value, because the lender will then approve a lower value loan. To overcome the issues, borrowers have to make larger down payments which can sometimes be unaffordable. 

 

Higher Interest Rates:

Most lenders offer construction loans with adjustable rates only. This means that the payment amount can increase in the future as the Federal Reserve resets the interest values. A lot of lenders also charge a higher interest rate for these kinds of loans, which are around a quarter of a percentage point higher as compared to private mortgage loans. 

Hidden Charges:

Aside from the interest rate and down payment, beware of the extra fees and costs that will come with the loan! While origination fee is often charged as 1% of the total loan amount, some lenders may also charge a penalty if you pay off the loan early or go for a refinance.  

Hope this helps….

We Will Help You Qualify for An Construction Loan- Click here to Get Prequalify.

For help with Construction loans- how to buy and build a home with a single loan contact Tony Busanich. Whether you’re purchasing or refinancing or remodeling your home, we provide straightforward, easy-to-understand products and advice, allowing you to make smart borrowing decisions that meet your needs today and tomorrow. Visit my web site at www.tdbank.com/tonybusanich,  or contact me at 732-306-2231, by email me at tony.busanich@td.com.

Comments(16)

Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.  Thanks for sharing and have a wonderful day!

Jan 27, 2022 07:21 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Tony, had a homeowner call a couple months ago inquiring about construction loans and building a custom home.  GREAT post.

Jan 27, 2022 07:40 AM
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Condo and Home Specialists

Great advice Tony, and those looking for construction loans will benefit from your warning to watch out for those hidden charges! 

Jan 27, 2022 07:53 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Kristin for reviewing my construction post. Wish you all the best. 

Jan 27, 2022 08:02 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Joan, Great to hear that people are looking to build in this market. Now you have some new information to use. Wish you all the best. 

Jan 27, 2022 08:04 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Larry & Sheila for reviewing my post. Many people that are in the process of completing a build/ construction loan don't realize the hidden fees that are include with this type of loan. Our program include all the fees upfront. Wish you all the best. 

Jan 27, 2022 08:08 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Tony and thank you for the great information to share with us here in the Rain.  Make it a great day!

Jan 27, 2022 08:20 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Will for sharing, Wish you all the best. 

Jan 27, 2022 08:21 AM
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Tony,

Thank you for explaining the construction loan process.  There was a time, when we thought of building a home.  However in commercial real estate, we had a very able lender who knew exactly what to do.  A

Jan 27, 2022 09:00 AM
Roy Kelley
Retired - Gaithersburg, MD

This is very good information to share with prospective home buyers.

Jan 27, 2022 09:42 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Ron & Alexandra for sharing. When your doing a construction your need to go right an expert and not mess around with just anybody. Wish you all the best. 

Jan 27, 2022 09:48 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank you Roy for stopping by and sharing. Wish you all the best. 

Jan 27, 2022 09:48 AM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate (435) 632-9374 - St. George, UT
St. George Utah Area Residential Sales Agent

It all comes down to choices when thinking of getting a construction loan and consulting with an excellent lender, like you Tony.  You know all the important details on the best available products! 

Jan 31, 2022 03:45 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Tony, it is fun to get these calls, but we have so few lots available, unless you get out of town.

Feb 01, 2022 07:53 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank for sharing Wanda Kubat-Nerdin. When it comes to construction loans there definitely are detailed oriented mortgages and if you not on the ball from the start your going to get into a big trouble Wish you all the best. 

Feb 01, 2022 08:04 AM
Tony Busanich
TD Bank - Freehold, NJ
1-4 FAMILY HOME LOAN SPECIALIST

Thank for sharing Joan Cox on my post. Wish you all the best. 

Feb 01, 2022 08:05 AM