Construction Loan Mortgages

If one has a piece of land and wants to construct a house they will seek a construction loan mortgage. Some banks and mortgage companies extend construction loan mortgages which on completion of construction and occupancy may be converted to a fixed rate mortgage. The bank or the mortgage company have to be sure that the construction will take place and usually extend a variable rate construction loan mortgage. This means that one uses the money at different stages on the construction and not all together. Secondly the initial repayment installments are only the interest portion and after the construction is completed the loan is converted to a fixed term mortgage. A construction loan mortgage rate is generally a variable or what is called an adjustable rate. However this is not adjusted over a long period of time like 3 years or 5 years the construction loan mortgage lender will fix the interest rate for shorter period of time. It is advisable to the borrower to fix the time limit that they expect the construction to be completed in and keep some margins for delays in construction and the amount of loan that is required and then approach the mortgage companies for a loan. One can use a construction loan mortgage rate calculator to work out what their payments are going to be so that one has a fair idea how much they will be paying as installments.

Not a lot of banks or mortgage companies give a construction loan and in USA it is referred to as a ‘story board’ loan. As one does not have a house against which one wants to take the loan and the bank or mortgage company has to work out what the property will be worth once the house is constructed and then work out on what terms and conditions they are ready to extend a construction loan mortgage. Most mortgage companies and banks will look at a person’s credit worthiness their income and the value of the property once it is constructed before extending a construction loan mortgage and will insist on converting the loan to a fixed term mortgage after the house is constructed and has been occupied. The reason that a mortgage company or bank will do this is because they will be charging very low installments till the construction is completed and in all probability will only be charging interest and not the return of the principal amount of the loan. This installment will also go on increasing as one goes on using the loan. There will be closing costs to this mortgage also and so if one converts it to a fixed rate mortgage once the construction is done one will not have to pay closing costs again. One can find mortgage lenders for construction loans and there are mortgage broker construction loan specialists that one can talk to and get help from in getting the best possible construction loan mortgage.

If one has a mortgage on a house and wants to get some construction work done on it one can find mortgage companies that offer ‘construction loan mortgage existing home’. This is an easier mortgage to get as a lot of mortgage companies want people to take out a second or even a third mortgage and as one already has a mortgage it is not difficult to get a second mortgage. Most second mortgages are offered at variable interest rates so one needs to get their calculations right before taking on a second or third mortgage for an existing home.

There are banks that offer construction loans in USA and Wachovia Bank is one of the leading banks in the USA that offer home construction loan mortgages.