Construction Financing

What is Construction Financing?

Few people who want to build their dream home can pay for it upfront, even when they already own a home with a great deal of equity in it. Construction financing is simply an option that can help you to turn your dream home into a reality. Most construction financing plans will allow you to do things like purchase vacant land, pay your builder and contractors, and cover the other expenses of your custom build. In many cases, you can then pay off your construction financing in the form of a mortgage.

Why Choose a Mortgage Broker for Construction Financing?

Construction mortgages, loans, and other financing solutions are different from conventional mortgages for pre-built or developer-built homes. They have a different application procedure, they offer a wider range of arrangements and terms, and any issues have the potential to stall or undermine your construction project. When you’re taking on a project of this complexity and this importance, it is wise to work with professionals who can ensure that you make the very best decisions and understand all of the details of your financing.

Brokers can bring other advantages to the finance securement process that you may not expect, including:

• Multiple lenders: Don’t settle for comparing the products of only one lender, or even two. Brokers can show you a wider array of financing options from banks and other potential lenders so that you can be sure you’re choosing the lender which offers the most favourable terms for you.
• Unusual financing options: There are many more options for construction financing compared to purchasing a pre-built home. Brokers can help you make sense of your options and determine which is right for you. They can also let you know where terms may be more flexible and how that can help you.
• Peace of mind: We’re talking about your dream home here. You want to make sure that your financing is successful, and that you’re happy with the decisions you made years down the road. A broker can give you the professional perspective you need to have peace of mind.

Why Work With Mortgage Financial Corporation

Construction Financing Options

In general, there are a few different classes of construction financing options. Each specific product offers its own terms, but it is important to understand the major financing options:

• Construction only: These loans only cover the cost of constructing the home. Afterwards, if you cannot pay for the entire loan, you have the option to find a mortgage for it. This breaks the financing process into two steps. However, the funds are typically available immediately.
• Completion mortgage: These loans cover the cost of building the home and then simply convert it into a typical mortgage once the home has been constructed. This simplifies the process of acquiring financing, as you don’t need to arrange for the mortgage after the construction has been finished—you already have it. However, the money is only available when the house is complete, and the builder must front the costs.
• Draw mortgage: A draw mortgage is where you or the builder gain access to certain portions of the financing as certain steps in the building process are completed. A draw mortgage will allow the company to be paid in several stages, rather than in a lump sum upon completion of the build.
• Owner-builder: There are unique financing arrangements for homeowners who intend to build their own property.

As you can see, financing options differ greatly in regard to when the money becomes available, who fronts the costs for construction, when payments begin, the amount of those payments, and whether or not the financing will convert over to a mortgage after construction has finished. With all of these options, it is important to have professional guidance to make the right choices to suit your circumstances.

Discuss Your Construction Financing Options

Reach out to the team at Mortgage Financial Corporation to get honest, trusted advice about your construction financing plan.