Are you thinking about building a home? Unless you have the cash on hand, you will need financing. Building a home is different than purchasing a home. You take out a different type of loan.
If you plan on building, it’s essential to know the difference between a new construction loan and a mortgage.
Construction Loans Temporary
A construction loan is a short-term loan used to finance a building or renovation. The loan is typically paid in installments as the work progresses.
Once the construction is complete, the loan can typically be rolled into a traditional mortgage.
Why Does Bank Pay in Installments?
A financial institution usually pays out the construction loan in a series of installments known as “draws.” This is paid as the work progresses. In other words, draws are paid on the completion of certain stages of construction, such as the foundation, framing, and final finishes….