Construction Loans
Are you planning to build your dream home, renovate your existing property, or start a commercial construction project? One of the most important considerations when undertaking any construction project is how you will finance it. This is where construction loans come in.
Construction loans are short-term loans that provide financing for constructing a new building or renovating an existing property. They are typically used by homeowners, real estate developers, and commercial property owners to cover the cost of construction, which can be substantial. Construction loans are disbursed in stages as the project progresses and are repaid in full once construction is complete.
CONSTRUCTION-TO-PERMANENT LOANS
STAND-ALONE CONSTRUCTION LOANS
These loans are used exclusively to cover the construction cost and are paid off in full once the project is complete. Once construction is complete, the borrower may seek permanent financing through a separate loan.
HOW DO CONSTRUCTION LOANS WORK?
Construction loans work differently than traditional mortgage loans. Instead of receiving a lump sum payment upfront, the borrower receives the loan amount in instalments as the construction progresses. This is known as a draw schedule, and the borrower and the lender agree upon it at the beginning of the loan term. The draw schedule specifies when the borrower can request funds, how much they can request, and what documentation they need to provide to prove that the work has been completed. Typically, there are several stages of construction that must be completed before a draw can be made, such as pouring the foundation, framing the structure, and installing the roof.
Construction loans are typically interest-only during construction, meaning that the borrower only pays interest on the amount disbursed during construction. Once construction is complete, the borrower must begin making payments on the loan principal as well as interest.
If you’re considering a construction project, a construction loan may be the financing solution you need to make your dream a reality. Contact us to learn more about our construction loan options and to discuss your project with one of our experienced loan officers.