A construction loan is issued to finance a real estate project. It’s different from financing an existing house for it requires the owner to erect a building from scratch, and therefore, requires sufficient funding for materials, equipment, labor, and other construction costs.
Here’s an overview of hard money loans for new construction lending.
New Construction Loan
Any individual, be they a contractor or a business owner outsourcing that contractor, can apply for a new construction loan, which takes about a year to pay off.
According to a report by the US Census Bureau, it takes about seven months from the time the first block is dug up to the time the scaffolding and other equipment leave the lot. However, this report does not include the time it may take to get approval and hire equipment, manpower, and contractors for the construction.
Basics of A Construction Loan
There are some important things one must keep in mind before requesting construction financing, such as:
- Interest rate
- Down payment
Some private lenders might ask the borrower to pay in monthly installments, while others may demand a lump sum at the end of a fixed time period. With us, however, you’re free to choose your repayment method, from anything between daily to annual sums.
· Interest Rate
While we recommend an interest rate of 10%-13%, you can put forward a lower rate, and we’ll consider it based on your financial history and track record in the relevant business.
· Down Payment
Down payments are usually 20% of the mortgage and construction costs, but that’s entirely negotiable when you come to us. While we have the last say, you’ll always get to be the first to decide the down payment rate.
Here’s what we expect to know by the end of this step:
- Sum total of real estate financing.
- Builder information
- Estimated deadline
- Construction plans
- Estimated individual costs for every expense of the project.
The last step before closing the loan is the most crucial one of all: paperwork. Be sure to provide all the documentation requested by us in response to your online application.
Build Your Dream Property with Private Financing in New York City, NY
At Insula, you get to call the shots on the loan structure for your construction project from the moment you acquire the contract, fill and sign the application, and provide paperwork to the day we approve the loan. There are no hassles, nor is there a prepayment penalty.
Contact us today for any questions on the application process.