Learn how Top-up Loan Interest Rates are calculated
Instead of purchasing an existing house, have you considered constructing it? There could be several advantages of owning a brand-new house which includes lower repair costs, higher energy efficiency and an opportunity to customize tones of features. However, the first step is to understand how to obtain home loans to build it.
Starting the Process of a New Construction Loan:
The first few steps of getting construction housing loans sanctioned are similar to buying an existing house:
● Discuss with the lender to get pre-approved for the amount you can afford.
● Prepare your wish list of locations and features.
● Visit new home projects and builders that fall in your target price range.
● Your financing decisions will depend on whether you plan on buying a production or custom home. You can also opt for a top-up home loan on a pre-existing loan.
Should you buy a Custom-Built Home?
● If you are planning to a get a house constructed on your own with your own design, you have several financing options, but there would be more steps involved.
● Unless you are paying in cash, you will have to arrange for a construction loan.
● These are not as widely available as regular home loans, so you may have to shop around.
● Some lenders give a one-step loan alternative that is paying home loan interest rates only while the house is being constructed and then converts it to a mortgage as soon as the construction is completed.
● The primary benefit is that you will need to pay closing costs only once. But some lenders prefer a low risk two-step procedure.
● This requires you to opt for an interest-only loan for construction and post that refinance into a regular mortgage when the construction is completed.
● The short-term interest-only loan is often at a prime-plus rate whereas the later portion indicates scheduled mortgage interest rates.
Strong Credit Requirements
● There is also a home loan top-up alternative if you have an ongoing housing loan.
● Construction loans are often considered as higher risk.
● You shall need strong credit and a down payment of at least 20% to 25%. Specific down payment details are influenced by the cost of the land and planned construction.
● If you already own the land, you can use it as equity for your construction loan.
● Nowadays, since top-up loan interest rates are very considerable many people opt for it.
Though top-up home loan makes paperwork a tad simpler, your lender will thoroughly check the credit and credentials of your builder as well. There are some extra measures to be taken with regards to financing the construction of a home. However, when you keep in mind all the pros and cons you might find that the perks of a brand-new home outweigh the complexities. Happy building!