An Overview of Owner Builder Construction Loans

2007-03-08 10:33:40

( Financial )



Owner builder construction loans provide you financing, so that you can complete the construction of your home. These builder construction loans are categorized as short-term loans that require you to pay for only the interest while construction is ongoing, and the balance payable as soon as the construction is completed. Owner builder construction loans can be transformed into a mortgage loan if the house owner encounters any difficulty in repaying the entire balance at the end of the construction phase; however, the interest charges that will be provided by the lender will be higher than a typical mortgage loan. By availing of a mortgage loan you run the risk of having your home repossessed by the lender in the event you are unable to make payments after a certain grace period.

Owner builder construction loans can be obtained at any stage of the construction process of your home, whether it is before the construction, or while your house is being built; whether you employ a building contractor, or do the building yourself. The interest rate that will be charged will depend on the stage of your property construction, and on the market’s adjustable/variable rates.

There are a number of other different construction loans:

A remodel loan can be taken out to renovate, or construct additional rooms to your property.

A custom contractor loan requires the employment of a licensed contractor to build your home in order to guarantee on time completion of the construction within a specified amount of financing.

A tract loan is granted when the construction of your home must be based on the building contractor’s required specifications; however, you are free to make certain design or structural additions to your property as well.

State income construction loans are for self-employed individuals who do not need to show any proof of earnings; instead, some proof of savings must be presented to the lender. Application processing time is much quicker that other typical construction loans, but interest rates are normally much higher.

Applications for owner builder construction loans can be lodged with any national lender, regional bank or mortgage company.


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