Have you ever thought of building your dream home but have no idea how to finance it? Well then a construction mortgage may be just the thing for you! We can help you understand the terms that will come with a construction mortgage and answer any questions you may have regarding it!
Typically a mortgage is a set amount of money given in loan with the home being used as collateral. You would makes monthly payments to pay down this loan with a set term interest rate. When you have a construction mortgage the loan is paid out in installments typically to a licensed contractor.
A construction mortgage is usually paid out in three to four installments as work is being done to the home. The different phases in which payments will be made will be set forth within your mortgage documents. As work is completed an inspector verifies the work is done and then tells the bank or lending institution so funds can be released.
As we all know it can take months to build a home, sometimes years! Normally one does not have monthly mortgage payments until 30 days after the home has been complete. These terms are also set out in your mortgage documents.
Do keep in mind, with all new construction mortgages your lender will most likely ask for a new home warranty guarantee. This is a guarantee that is legally provided by the contractor that they will be responsible for anything typically within the first 5 years of the homes life. Meaning if the roof leaks on year 2 of living in the home, it is the contractor’s responsibility to fix it not yours. Whether you are getting construction or a conventional mortgage you should ensure the contractor you are using can provide this new home warranty for you. This will give you peace of mind and will help protect your pocket, which can really come in handy once you start paying your mortgages!
The only drawback to a construction mortgage is most times you have a slightly higher interest rate than a conventional purchase. This is due to the fact that starting out there is no home for collateral and the bank charges a slightly higher interest rate to make up for this.
So if that dream home is in the back of your mind and you want to bring it to reality, call us today to discuss your options with a construction mortgage. We are here to help you, answer any questions and to ease your mind. Let Team Jardine, your mortgage broker, do all the work for you so you can start planning your very own dream home!!