Construction Loan Calculators

2007-10-15 12:53:47

( Financial )



Definition of Construction Loan

Some people prefer to build their own homes from the ground up instead of purchasing a completed home. Creditors have designed a special package just for this type of homeowner, which is known as the owner builder construction loan. Remodeling loans also follow the structure and repayment terms of construction loans.

Construction Loans Compared to Regular Mortgages

Owner builder construction loans don't have the standardized structure of regular mortgages. For one, they are very short-term in nature, lasting only for the duration of the construction project. Hence, a typical construction loan is on interest-only payment basis while the project is going on, but becomes fully payable at the end of the construction.

Construction loans also differ from regular mortgages in terms of loan approval process. When you apply for a regular mortgage, you are evaluated in terms of your personal background and credit history, primarily to determine your ability to service the new loan. But when you apply for a construction loan, the lender will evaluate not only your own background, but also the viability and cost of your homebuilding or remodeling project.

Interest rates for construction loans are typically variable in nature, based on prime rates. You need to submit a project proposal showing all the stages of construction, and set up a draw schedule with your lender to facilitate proper timing and release of funds.

How a Construction Loan Calculator Can Help

You can apply for a construction loan at most financial institutions. There are also very limited sites on the web that offer direct application or give you referrals to other institutions that can provide construction loans.

Some sites feature a construction loan calculator to help you figure out how much interest you will be paying based on your estimated project length and costs, and the prevailing loan rates. The construction loan calculator is a valuable tool for helping you plan on your homebuilding project properly, and to budget out your construction loan servicing costs versus your other monthly expenses. A construction loan calculator also sets the limits as to what you can borrow.

Limitations of the Construction Loan Calculator

You are not committed to any loan deal when you use a construction loan calculator, as it merely serves as a guide to help you with your project decisions.

Neither is the lending site obliged to grant you the amount and terms that you have inputed when you use the construction loan calculator. You still need to be subject to a credit evaluation process, on the basis of not only your project costs and schedule, but also your own personal credit qualifications.


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