Construction Loan Article Center

Monday, July 24, 2006

Construction Loan Rates in Today's Market

Out of Sequence Post

Once in while the question and answer section of the construction loans blog has to be broken to keep our readers informed of the current developments.Interest rates are at a four-year record high and yet at very low historic rates. On the other hand real estate values, thou stabilized, are extremely high putting new home purchase out of reach of a lot of people.

When building your dream home you typically have an automatic 15% or so sweat equity. In other words because you put in all the work of organizing the whole deal you end up with a property that's worth around 15% more. Grant you construction loans are at a slightly higher rate and you pay interest during the construction period, you still have a 15% advantage.
Construction loans normally will have an interest reserve account built into them, which means that during the construction period you are not actually relying on your own cash flow to finance the payments on your existing mortgage as well as the home under construction.

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