Building a home and need funding to build it before your First Mortgage Lender will advance funds? A Construction Loan is a Short Term Mortgage to get to a Long Term Mortgage. A Temporary Mortgage while you are doing Construction which will be paid off by the Lender of a Traditional Home Mortgage is a normal and common occurrence. If you have a Construction Loan in place, the funds will be released in milestones which are established along the progress line of your build. The funds will generally be disbursed by an Escrow Agent who will verify the work has been completed and the the invoices being paid are accurate and the work that the invoice relates to has been completed to your satisfaction. Many times this will give you the assurance of the work performance that may not be possible if you were disbursing the funds yourself.
One the home has been completed, the First Mortgage Lender will payout the Construction Loan after inspections have been completed. You will then be required to make your normal monthly mortgage payments to the First Mortgage holder.
At times you may need a Bridge Loan
While a Construction Loan is a type of Bridge Loan, there are many other circumstance that would require Short-term Financing. Many times home buyers would have to match their selling and buying dates, which to say the least can be problematic. It has always been a struggling act to pack the moving truck and unpack it, all in less than a day.
Somehow, everyone manages to get it done but the stress that comes along with that task can be overwhelming for some. If you have a few children, perhaps a dog and cat, plus a house full of stuff and you have a real circus on your hands!
More buyers are taking a more relaxed approach. Bridge Loans getting more popular as it permits for a more humanistic move over a few day period. If there are renovations being done before you move, you can delay the move for weeks or months with a Bridge Loan