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Home >> Lending >> Home Mortgage
Need Mortgage to Build House: Now or Later?
I am planning to build a house that should cost $186,000 on a lot that I already own. I have $100,000 to put towards the house. Should I start to build the house with the money that I already have, and then mortgage the $86,000 later to not have to start paying the mortgage payments until then?
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 Get your financing lined up now. You can request a construction loan. On this type of loan you would pay interest only on the draws you make on the banks money. That means you can use your money first and you won't have payments to the bank until you begin to draw on the $86,000, and that would probably be interest only until maturity. When the construction loan comes due, they would roll the loan into a permanent mortgage on agreed upon terms.
If you start now, there could be a problem that the bank wouldn't be able to resolve. Then you'd have a home three-quarters completed with no source for the other financing. There could be any number of problems between building codes, flood zones and state laws on mortgages and homeownership. By arranging your funding in advance, you'll know that the resources are available to carry you through.
Published on BankingQuestions.com 9/14/07
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