Do Construction Loans Have Higher Interest Rates?
An estimated 10% of Australians build their homes annually. Once they purchase the land, they have the authority to build on it. Owner-builders and investors must obtain the proper permit to ensure that their project has approval. Then, if they need to finance the project, they apply for construction loans.
Conventional loans remain the standard mortgage. Thereafter, lenders offer a range of variable-rate loans. Constructions differ from mortgages. These loans fund the construction of new properties. Even though the majority of construction projects reach the finish line, the lender still takes on risks. If something falls through, lenders recoup their losses by taking ownership of the land. However, lenders prefer that owner-builders and investors complete their projects.
Since each builds on vacant land, construction loans have higher interest rates. Keep in mind that these loans only last the duration of the project; it takes six to 12 months to complete a new build. Thus, the interest rate accumulates over a shorter period. Owner-builders can roll their construction loan into a mortgage in most cases.
Mortgage House provides a range of loans to owner-builders and investors. The interest rates have a range and depend on several factors. Our loan specialists can walk you through your options. Plus, they have the tools to evaluate all applications efficiently.
Constructions Loans Conclusion
Although construction loans have higher home loan interest rates, Mortgage House works with owner-builders and investors. Our loan specialists can find the best loan terms for most applicants. Contact our team today.