Can a Construction Loan Pay Off a Land Loan?
Every mortgage type on the market has a purpose. When borrowers use them in a different manner, the lender retains the right to cancel them. Construction loans help owner-builders and investors pay for materials and labour related to the project. In some cases, lenders allow borrowers to pay off a land loan with it.
If that’s your intention, it’s important to communicate it to the lender. When you apply for a construction loan, you submit your plans and estimates to the lender. For construction projects, lenders issue a loan-to-value ratio of 50% to 70% in most cases. The LVR indicates that they expect borrowers to finance a portion of the project.
The application process helps lenders determine the financial viability of the applicant. Those who have good credit and property equity can qualify for a higher amount. If they find extra funds, they can use their construction loan to pay off the land loan. However, rolling over the financing in this manner doesn’t work for every applicant.
Mortgage House is a non-bank lender that works with an array of clients including owner-builders, investors, and homebuyers. Our loan specialists can find competitive loan terms for many clients.
Once you become our client, you receive access to our other products including our business loan.
Pay off a Land Loan Conclusion
The purpose of a construction loan remains to pay for the labour, materials, and permits. Those who seek to pay off a land loan with it can contact Mortgage House to discuss the details. Our loan specialists can help.