It is the beautiful dream of every person to construct his or her own home. This dream can be made into a reality with the help of construction loans. Nowadays, numerous banks and private financial institutions are there that provide construction loans to their customers. This facility is in fact a boon for people who lack money to build a home or do expansion works to their existing homes.
Do you want to construct a new home, expand your kitchen area, or reconstruct your living room? Then the best option is to apply for a construction loan. At the same time, it is imperative to inquire about the construction loan rates. The construction loan rates can vary between different banks. This will help you to fetch a loan that will be feasible with your budget and requirements. Read along to know more about the subject.
Construction loans rates and home loans
A construction loan is quite different from a typical home loan. The main difference is that you will be able to make a convenient down payment, prepare the possession for your new home and make EMI payments to the lender with the help of a home loan. On the other hand, the entire process is different when you take a construction loan. You ask the bank or the private financial institution to prepare the estimate of your new home that is to be constructed. They lend you the money as per the construction estimate prepared by them. Most banks usually provide construction loans for a 12-month tenure. Many things can happen during this loan period. It can be the likely construction delays or the unexpected construction overheads. Construction overheads can happen if problems arise with your current job. It can also incur if the building contractor of your home runs short of money and is not able to finish the work in time.
Adding to that, you must note that banks provide construction loans strictly on a reimbursement process. You will not receive any advance funds for the construction works. The banks will only approve funds based on the completed construction works. You will have to make timely fund requests along with the supporting documents to prove that the construction work is in progress. This way, you do not have to fear about any unexpected monetary problems during the tenure of the construction project. In this context, it is highly advisable to take a construction loan instead of the conventional home loan to build your dream house.
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