29 Mar 2022

Is the Lot Price Included in a Construction Loan?

Lot Price and Construction Loans

Construction projects have two phases, land purchase and construction. Loans to finance each phase exist. When owner-builders and investors require financing to purchase the land and to build the structure, they must take an organised approach to obtain each. The land has a price; it can require an investment. Therefore, lenders prefer that construction loan applicants own the land before requesting the construction finance. Thus, a construction loan does not include the lot price.

Financing for construction projects covers the labour, materials, and permit costs. Land loans cover the price of the land. Lenders separate the two for a few reasons. Vacant land has value. Once the owner pays off the debt, the land accrues 100% equity. The owner can leverage the equity against the construction loan. Owners who walk into construction projects with debt on the land and the project become a high risk for lenders. 

Mortgage House remains an innovator in the lending industry. Our team has the tools to evaluate all loan applications efficiently. Plus, they can find competitive loan terms for most clients.

Loan options from Mortgage House for construction projects include:

  • Advantage 1 Year Fixed Investment
  • Advantage 2 Years Fixed
  • Advantage 3 Years Fixed Special

Those who need to finance the purchase of the lot can discuss it with our loan specialists. We also provide refinance home loan opportunities.

Lot Price and Construction Loans Conclusion

Most construction loans do not include the lot price. Financing for construction helps owner-builders pay their crews, materials, and related expenses. Mortgage House loan specialists can provide more information. Contact our team today.

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