Most of us would love to know how to obtain cheap construction loans that would be a great help in times of stress due to construction work and having to pay back money within certain pre-planned schedules.
First of all it is important to clearly differentiate construction loans with mortgage loans. A construction loan is a loan that gives you the possibility to construct a home from scratch including modular homes, while mortgage loans can be accessible when you intend to purchase a property that already exists.
Mortgage loans are paid in single installments and start as soon as the signing of the loan has been made and registered. Construction loans however, are paid in different installments by the loaning companies and are disbursed in smaller regular amounts. Once you have planned your various construction stages of the house construction the first installment is paid to the suppliers and subcontractors.
Being short term loans, construction loans have higher interest rates that mortgage loans also because they come in the line of credit. Once you have applied for a construction loan and you have completed the construction work you can transform your construction loan into an ordinary mortgage. However, the construction must be certified as completed before you can apply for the mortgage loan.
Finding a good and cheap construction loan is much easier nowadays with the advent of the Internet. All loaning companies now have their own websites where you can find information and terms they offer in order to compare them with the other loaning companies and find the best deal.
When browsing through the conditions offered by banks and governmental financial institutions you will find these offer common interest rates that are usually lower, but the approval procedures are very long and more complicated. On the other hand, private loaning companies offer faster approval procedures, while charging higher interest rates.
If you opt for the latter solution make sure your research the loaning companies thoroughly and get as many details as you can form various loaning companies, to be able to compare what they offer as well as the interest rates and fees. Keep in mind that the private loaning industry is very competitive so there is no reason why you should get a bad deal, for you can even negotiate with interest rates; just make sure there are no hidden charges before you sign.
Make sure you research well and in detail and talk with the same person within the loaning company, as this could cause confusion. Check on any additional charges as most private loaning companies do charge extras. Most of these loaning companies will propose two loaning options, with two different interest rates. These will be variable or fixed interest rates, the former will vary with the market fluctuation and the national economic policies, while the former will not change. Fixed rate are always higher than variable rates but are less risky, so it is up to you to decide. Before deciding which loan you are going to choose make sure you have all the information in order to make the right choice.