Mortgage brokers and home loan specialists often have an insight into construction loans that can save you a lot of heartache and stresses down the line.
Why do lenders sometimes make construction loans more expensive?
This is often due to the expectation that the contract price might increase after you make changes and variations to your home construction. As end users, we get a little emotional, and tied up in raising the levels and increasing the wants and desires, and before you know it, your contract price has risen and you don't have the money to finish the job.
Lenders understand this and unfortunately, an incomplete home is not worth as much as a fully completed construction, hence, the security of the property is compromised.
There are a few things that you can do to avoid this problem down the road.
1.) Get a fully completed building contract, and ensure that it includes all specifications and finishes.
2.) Understand what the builder means when he refers to an "allowance" and always ensure that this "allowance" is adequately inline with realistics costs.
3.) Pay for any changes to the contract yourself, and ask the builder to reimburse you in the event that you received any discounts.
4.) Consult your lender before making any massive changes
5.) Don't compromise on quality and expect the end valuation to stack up.
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