Any person would like to get their home financed and at the same time get the burden distributed. Everyone knows about the mortgages as they are very common and known about. But on the other hand a construction loan can be confusing and a lay man might not know about it. A construction loan if understood well can be a sigh of great relief for many people. It can also be understood that a construction loan is very different from a traditional loan. A traditional loan can be like a mortgage loan which has a fixed rate and is also paid over a period of time. The process that is involved in a construction loan is different from that of a mortgage broker. In some contrast the construction loan that is taken is underwritten over a period of time which is due to the last day of the construction process. Mortgage brokers in Blacktown help in various such processes.
A Construction Loan Is Like A Credit Card
A good analogy that can also explain the construction loan is that it can be considered like a giant credit card that lasts upto the last day of the construction loan. After the house you have built, you get a mortgage loan on the value of house. The construction loan is then paid off from the amount of the mortgage loan and carried forward.
Logically A Person Needs Both Construction Loan And Mortgage
A construction loan can be very useful over the course as it is a source of short term finance. If the bigger picture is kept in mind, a mortgage loan is a source of long term finance. Both the loans go hand in hand. Due to mortgage the effect of construction loan is left null. There are two facets to the process:
- One Step Construction Loan: In a one step construction loan only one time approval is required. This is because mortgage and construction loan are provided by the same broker.
- Two Step Construction Loan: In this process the construction loan is approved once but the mortgage loan is approved from a different lender altogether.