Choosing between single, close and multiple construction loans | Personal Loans
The good thing about building your property whether it is a home, workshop, garage or any other structure is that you get the exact design and structure that you desire. You get to make all the important decisions concerning the quality, budget, design and others. One of the most important decisions you will make during this whole process is how you will get a construction loan and how you will pay it off when the building is done. If a construction loan isn’t for you, why not consider a personal loan? With the help of personal loans, you can borrow up to £35,000 and repay it over the course of 6 years (using small monthly instalments). This way, you are gradually paying it off instead of all at once. For more information visit the Simple Personal Loans website.
The main purpose of construction loans is to buy land, cater for the construction of a building and improve structures that are already developed. Construction loans can last 2-3 years which means you will need a long term loan to replace this type of loan. When you take a construction loan, you will need to figure out how to complete the payments.
The single close construction will allow you to obtain two types of loans at once. This means you will get the construction loan and permanent loan simultaneously. When the construction on your home is complete, the lender will convert it to a traditional mortgage loan. You have the options to get it changed, refinanced or converted. Single close construction loans are commonly known and construction to permanent loans.
Two close construction loans will need you to apply for both loans and wait for the approval. Here, the construction loan is meant to fund construction projects and the lenders will require you to apply for a permanent loan on its own and wait for the approval. This loan is applied for when the construction to the home is done.
What are the benefits?
The main benefit of having this type of loan is that you will only need to make one application to get the two loans. Multiple closings on the loans mean the lender will charge your ore money. Even though the difference is low, it makes a difference and the application is much easier. Some of the lenders may add some costs on the interest when you are in the construction process, this will make it easier for you to clear all the loans faster while the house is being built. With this loan, you are guaranteed permanent financing which makes it more secure. If something happens to your income during the time of construction, you may still receive the permanent loan.
Taking the permanent loan early will help you make better plans. You will have an idea on the interest rates and will have enough time to make the monthly payment budget.
Applying for two different loans will give you some lower rates on the interest. You may not enjoy the benefits of one closing, but you will get lower interests. When you get the construction loan, you will have the freedom to choose your permanent loan from a different lender. You have the chance to shop around for lower and convenient rates.
Alternatives / Personal Loans
As mentioned previously, personal loans are a great alternative to construction loans (depending on the amount you wish to borrow). Instead of having to repay it all at once, you actually repay this type of loan over the course of upto 6 years. Usually, you would repay a percentage of your fixed amount every month until the loan is paid off. This is to make it easier and less stressful for you.
Next Post: Major pros and cons of construction loans.