If you’re considering building a new custom home, chances are that you may need to fund at least a portion of the project using a construction loan. But given the many financial and economic changes that the COVID-19 pandemic has brought about, will new home construction loans still be as readily available going forward?
The answer to that is a solid “maybe.”
A construction loan is a short-term loan that can provide you with the funds that you need to build your new residence. It is important to note that construction loans are not the same thing as a home mortgage.
For instance, these loans are typically just one year in duration. During that time period, the property is being built. The funds from this type of loan will typically go towards the labor and the materials for completing the residence.
In most cases, the lender on a construction loan won’t pay out the entire amount of the proceeds all at once. Rather, the funds from the loan are distributed in phases, as the work on the home progresses.
The interest rate on a construction loan will typically rise and fall as the prime rate goes up and down. Generally, the interest rate that is connected to new home construction loan is higher than that of a traditional home mortgage.
As a result of the COVID-19 outbreak, the economy has been impacted in many ways – including the cost of financing. For instance, mortgage rates are at historical lows. So, if you are planning to move forward with the building of a new home, now may be the time to work on your financing – as your payments could be significantly lower today as compared to a year ago.
That being said, construction has been slowed – or even halted – in some areas of the country and receiving supplies has become more difficult. With that in mind, even if you are in a solid financial position for going ahead with the project, it is important that you know what you can anticipate in terms of time-frame for completion and costs.
If you’re considering the design and build of a new custom home in the Orlando or Central Florida area, we can help to answer any questions you may have regarding cost, time-frame, and financing options, as well as various changes that have taken place due to the COVID-19 crisis. So, feel free to reach out to us directly at contact information and we’ll schedule a time to chat.