Understanding Construction Financing in the Beach Haven West Real Estate Market
Building a Home in the Beach Haven West Real Estate Market
The Beach Haven West real estate market has been undergoing a substantial transformation. The entire area has witnessed an unprecedented wave of new construction thanks to Hurricane Sandy. With many of the original homes in Beach Haven West having sustained flood damage, there has been a movement to create a more storm ready community and limit the cost of flood insurance. For those looking to build a new home in the Beach Haven West real estate market, it is important to understand construction loans in Beach Haven West and how they can differ from traditional financing.
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com
www.beachhavenwestrealestate.com | www.BuyLBI.com
Click here to search all homes for sale in Beach Haven West
Construction Loans in Beach Haven West
Let me begin by pointing out that every individual will have a different financial scenario. Therefore, it is important for any buyer in the Beach Haven West real estate market or any person looking to obtain financing to speak with the appropriate lending institution to understand their personal situation. That said, there are some generalizations concerning construction loans in Beach Haven West that can help a buyer to decide if building a new home is the right option for the them.
- There are construction loans available for both primary and secondary homes
- Most construction loans carry a higher interest rate than conventional financing
- Not all banks offer construction loans as they are considered to be riskier than traditional financing
There are a number construction loan products available depending on the individual. The options available to a buyer will partly be determined by the intended use of the property. There are special loans available for storm damaged properties, for example a 203K loan which applies only to a primary residence. Construction loans for secondary or vacation homes may be more difficult to obtain and are available from a limited number of lending institutions. For most construction loans, a bank will look at the purchase price of a home in the estimated cost of construction and then land a portion of the total number, usually 75%. Once the construction is completed many of these loans will automatically roll into a fixed rate conventional product.
Construction loans carry a higher interest rate than traditional financing. In addition, most construction loans are available as interest only products. The good news is, the interest is charged only on the money used to that date. For example, if $100,000 is being borrowed to build a new home in Beach Haven West, the loan will most likely be broken into four $25,000 payments. The interest will be charged on the initial $25,000 and once those funds have been used, the bank will release the next $25,000 payment to the contract. Now the interest charged will be on the $50,000 that is being dispersed. This process will continue until the home is completed and alone transfers into a conventional product.
The number of institutions willing to lend money for the construction of a new home is far less than the number of institutions that are willing to lend money in a traditional product. Typically, construction loans fall under the guise of an investment loan and they are considered to be a more risky endeavor for the back. This is why they charge a higher interest rate as the banks are perceived to be assuming greater risk.
Construction Loans and Building a Home in the Beach Haven West Real Estate Market
Building a new home in Beach Haven West offers some distinct advantages. A new home will be built to the current code and will offer and will offer modern conveniences such as additional Internet connections and better materials. In addition, flood insurance rates will be substantially less on a new home making the overall investment. Even with the advantages of a new home offers, building a new home in Beach Haven West is not for everyone. The process can be long, sometimes up to a year, and any home buyer must factor in the additional cost of financing when seeking a construction loan. That said, under the right circumstances, building a new home in the Beach Haven West real estate market may be one of the best investments you can make. For more information about construction loans in Beach Haven West or an update on the Beach Haven West real estate market, contact the Beach Haven West Real Estate Group and we will respond right away.
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com
www.beachhavenwestrealestate.com | www.BuyLBI.com
Click here to search all homes for sale in Beach Haven West