A construction mortgage is a loan that covers the expenses of constructing your home. This differs from other types of loans in a number of ways. Here are a few options especially designed for construction mortgages.
1) Completion Mortgage
You can get two types of mortgages when you are constructing a new home. The first is completion mortgage where the loan isn’t transferred until construction is fully completed. You may still be required to pay a down payment.
A completion mortgage can give you peace of mind that the mortgage won’t be finalized until you have something in. You probably won’t have to wait that long if you want a completion mortgage. Most lenders who do these types of loans want the construction to be finished in 4 months.
2) Draw/Progress-draw mortgage
The draw or a progress-draw mortgage permits the builder to draw funds during the building process. Using a progress-draw mortgage, the loan is disbursed in installments. The first installment will be given when the build starts. The second installment will be given once the construction is finished at around 35-40%. The third installment will be given at around 65-70% completion of the build. The final installment will be given when the build is close to or at 100%. This option is also available if you’re building your own home.