Steps to understand the process of Top-Up Loan
by Litty Jose Finance AnalystInstead of
purchasing an existing house, have you considered constructing it? There could
be several advantages of owning a brand-new house which includes lower repair
costs, higher energy efficiency and an opportunity to customize tonnes of
features. However, the first step is to understand how to obtain home loans to build it.
Starting the Process of a New Construction Loan:
The first
few steps of getting construction housing
loans sanctioned are similar to buying an existing house:
● Discuss with
the lender to get pre-approved for the amount you can afford.
● Prepare your
wish list of locations and features.
● Visit new
home projects and builders that fall in your target price range.
● Your
financing decisions will depend on whether you plan on buying a production or
custom home. You can also opt for a top-up
home loan on a pre-existing loan.
Should you buy a Custom-Built Home?
● If you are
planning to a get a house constructed on your own with your own design, you
have several financing options, but there would be more steps involved.
● Unless you
are paying in cash, you will have to arrange for a construction loan.
● These are
not as widely available as regular home loans, so you may have to shop around.
● Some lenders
give a one-step loan alternative that is paying home loan interest rates only while the house is being constructed
and then converts it to a mortgage as soon as the construction is completed.
● The primary
benefit is that you will need to pay closing costs only once. But some lenders
prefer a low risk two-step procedure.
● This requires
you to opt for an interest-only loan for construction and post that refinance
into a regular mortgage when the construction is completed.
● The short-term interest-only loan is often at a prime-plus rate whereas the later portion indicates scheduled mortgage interest rates.
Strong Credit Requirements
● There is
also a home loan top-up alternative
if you have an ongoing housing loan.
● Construction
loans are often considered as higher risk.
● You shall
need strong credit and a down payment of at least 20% to 25%. Specific down
payment details are influenced by the cost of the land and planned
construction.
● If you
already own the land, you can use it as equity for your construction loan.
● Nowadays,
since top-up loan interest rates are
very considerable many people opt for it.
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Created on Nov 20th 2017 01:27. Viewed 839 times.