We are looking at buying some property and we have a house plan picked out that we like. I talked to my mortgage guy that I’ve used for my last 2 houses about a construction loan and he told me that I would be looking at paying 5% down initially and then I would have an interest rate of 5.8% during the construction process and 4.3 once construction was done and we converted it into a regular loan.
My question is while the house is being built, do I make payments monthly like I would for a normal mortgage? Or do I just make a payment when my contractor takes a draw out for whatever phase in the process he’s in? As in if he only takes 4 draws over the 8-10 months he expects it to complete house, am I just making 4 payments during this time or do I make a 5.8% payment each month on whatever’s been borrowed to that point? Also, when I make this %5.8 payment whether it’s monthly or just per draw, am I lying straight interest to the bank separate from my future mortgage? Or does that $ go towards the interest I will owe when we finish be loan?
I didn’t understand this part of it and it’s concerning to me because the cost to do this is rapidly rising more than I anticipated. Total amount of the loan will be approximately $400,000 minus about a 30K initial down payment. Paying 5.8% for 8 months could become very costly. We’ve never been thru this process so if anyone has knowledge of how it goes I would appreciate it.
Thx
My question is while the house is being built, do I make payments monthly like I would for a normal mortgage? Or do I just make a payment when my contractor takes a draw out for whatever phase in the process he’s in? As in if he only takes 4 draws over the 8-10 months he expects it to complete house, am I just making 4 payments during this time or do I make a 5.8% payment each month on whatever’s been borrowed to that point? Also, when I make this %5.8 payment whether it’s monthly or just per draw, am I lying straight interest to the bank separate from my future mortgage? Or does that $ go towards the interest I will owe when we finish be loan?
I didn’t understand this part of it and it’s concerning to me because the cost to do this is rapidly rising more than I anticipated. Total amount of the loan will be approximately $400,000 minus about a 30K initial down payment. Paying 5.8% for 8 months could become very costly. We’ve never been thru this process so if anyone has knowledge of how it goes I would appreciate it.
Thx
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