Have you ever found yourself in a position where you just can’t seem to find your dream house no matter how hard you look? Well, if you had, then try to stop looking. If you can’t find the perfect house to buy then you might as well build your own house. This is where building loans come into play. They help you do just that. Build your own house. Now you might be wondering, what exactly is a building loan? You’ve heard of a home loan right? It’s the same thing as that. Except for a building loan you have to have payments for the land, and the construction of the house itself. If you still don’t get it then think of it as a mortgage option. It is an option for you to be able to build your dream house without having to worry about the need to pay it in full straight out. This way you can have several payments for years to come.
Am I Going to be Charged Interest?
Nowadays anything you loan will always have an attached interest rate. And to answer your question, if I haven’t made it anymore obvious, yes you need to pay interest. The payment scheme depends on the bank or company you loaned it from. It can be monthly or annually. But most likely it would be a monthly charge on each down payment you requested and as approved by the bank per month.
What are Progress Payments?
Progressive draws in which the loan is paid out is what you call progressive payments. The said draws are paid out as the building is finished in phases. The bank or the company will usually send the payments to the builders if they are satisfied with the work done. And since the building is done in phases, each phase receives a payment until it is fully done. Normally, building work is divided into 3 or 4 phases which add to 3 or 4 payments.
Two Important Tips
A very important piece of advice would be to never believe the initial projected cost of the whole building. Around 70 percent of the time houses cost more than the initial projected cost. What happens, and I’m hoping this doesn’t happen to you, is that some people usually end up not having the funds available when their house is almost near completion. That is why it’s very important to add another 10 to 20 percent on the expected cost.
Another advice would be to check the reputation of the construction company you’ll be hiring. It’s very important to find the right people to finish your dream house. And one way to ensure that you will hire reliable and well experienced builders is to check their credentials. Try to look at past projects they’ve and ask if they were able to meet the deadlines for those projects. Another way to check up on your builder would be to look for reviews on the internet. If your builder is known then chances are there are people who have rated and reviewed their work online.