What are Typical Payment Terms for Contractors?
Construction projects for new homes and multi-unit buildings have stages. Therefore, the payment terms for contractors for these projects follow the outlined timeline. A construction project has five stages. Most contractors require a deposit to start the work. It makes sense to hire crews that have experience with these projects. They’ll understand how payments disbursements work when the project receives financing.
The five stages of a construction project generally include:
- Slab and base
- Roof and enclosures
Then, each phase receives a percentage of the total payment. The percentages generally follow 16%, 26%, 24%, 20%, and 7%. Plus, they receive a 7% deposit.
When the project hits the milestones, the borrower can submit the necessary paperwork to request the payments. It takes lenders between five to 10 days to process the paperwork and send out the funds.
Owner-builders will find that the process remains straightforward. The lender simply must ensure that the project moves according to schedule. If it hits major snags, all parties must regroup and decide for its future.
Mortgage House provides an array of loan products including construction loans. We also provide several online resources to help homebuyers, investors, and owner-builders prepare for the application process.
Try our Mortgage House home loan calculator online for free.
Payment Terms for Contractors Conclusion
The payment terms for contractors in construction projects remain almost the same across the board. It helps to hire crews who understand how the payment disbursements work for construction projects. To dig deeper into construction loans, contact our Mortgage House team. Our loan specialists remain ready to help.