Real Estate Financial Models

The model explains the process and the cost involved in case of Construction Loan without Refinance. A construction loan is a short-term loan that covers only the costs of custom home building. This type of loan is short-term and is usually issued for a year. It’s meant to cover only the actual construction period.

A construction loan is a short-term loan that covers only the costs of custom home building. Once the home is built, the prospective occupant must apply for a mortgage to pay for the completed home.
However, there are several other loans available when it comes to home building, from ground-up building to completely gutting a current home so you can renovate. So, whether you have a plot of land and need to start from scratch, have a teardown situation where the current home has no redeeming value in your eyes or want to keep the bones of the structure but change pretty much everything on the inside, there’s likely a loan out there that’s right for you.
Construction-Only Loan
This type of loan is short-term and is usually issued for a year. It’s meant to cover only the actual construction period. Like many lenders, Rocket Mortgage doesn’t offer this type of loan. Why? With so many variables like the builder’s cooperation, getting approvals from local municipalities and more, these are considered higher-risk loans. This means they’re harder to qualify for and the interest rates will likely be higher than a traditional loan. In addition, if you decide to go this route, you’ll have to pay a second set of loan fees when you apply for a traditional mortgage.
Construction-To-Permanent Loan
This is a type of loan that prospective custom home builders can apply for. Much like construction-only loans, construction-to-permanent loans are one-time loans that fund construction, but then convert into a permanent mortgage. During the construction phase, borrowers make interest-only payments. It’s important to note that these types of loans can be much more expensive than traditional mortgages, so if you decide to go this direction, be sure to shop around, compare rates and find the best deal before you pull the trigger.