Building your dream home is an exciting journey but may come with financial challenges. If you are building your own home or managing a large renovation, a construction mortgage can help you manage the costs associated.
Unlike a traditional mortgage, which provides a lump sum of money upfront, a construction mortgage provides funds in stages as the construction progresses. This type of mortgage is also known as a builder mortgage or draw mortgage.
If you are building a home with a home builder or contractor, they will usually provide financing until the project is completed. After that, a traditional mortgage will take effect.
A construction draw mortgage is a type of construction mortgage that provides funds in stages, known as “draws,” as the construction progresses.
Draws typically occur at specific milestones during the construction process, such as the completion of the foundation, framing, roofing, drywall, and finishing. The number and amount of the draws can vary based on the lender and the specifics of the construction project.
There are several benefits to a construction mortgage:
Construction Mortgage Considerations
It’s important to note that construction mortgages often have higher interest rates and fees compared to traditional mortgages. Additionally, you will need to provide detailed plans and a budget for the construction project to the lender for approval. It’s also advisable to have a contingency fund in place to cover any unexpected costs that may arise during the construction process.
If you are considering contracting your new new home build or undertaking a significant renovation, a construction draw mortgage may be a suitable option for you.
Mortgage Services
Contact KMS Mortgages to help you navigate the construction mortgage process and ensure you are making the best decision for your situation.
