As the construction market makes a comeback, you might be thinking of building your own dream home. But in an uncertain economy and with interest rates on the rise, you’ll want a financial solution that reduces your financial risk.
Introducing – the Power of One. With a single-close construction-to-permanent loan from Valley, you make monthly interest-only payments on advances during the construction phase, followed by monthly principal and interest payments during the permanent phase
– at the interest rate agreed to in your mortgage note. Other banks may require you to apply for a separate permanent loan after the construction is completed where you face the risk of not qualifying for your second loan. And if you do qualify, it may come with a higher-than-expected interest rate.
The downside of multiple construction loans
The traditional construction loan process can be very stressful for borrowers because it usually involves taking out multiple loans: one short-term loan to cover construction costs and then a second loan for long-term financing.
This cumbersome process means that you must apply for and qualify for multiple loans, sometimes work with multiple lenders, and pay for multiple closings (averaging 3 – 6% of loan cost). And if your financial situation changes between loans – you could lose your job or encounter unexpected expenses – you might not qualify for the second loan. In that scenario, you could pay to build a house that you never get to live in!
Additionally, interest rates may rise between your first and second loan, which could make a significant difference in the amount you pay for your loan over time.
The benefits of single-close construction loans
Single-close construction loans (also referred to as construction-to-permanent (CTP) loans or all-in-one loans) simplify this process with the power of one – one application, one approval, one closing and one set of loan documents that spells out everything up front. This takes a lot of worry, stress, and risk out of home construction.
Some of the advantages of single-close construction loans include:
- Predictable fixed rates
- Security of a permanent loan
- Reduction in fees, paperwork and closing costs
- Interest-only payments during construction
- Bank handles payments to builder
- Peace of mind
Valley helps home builders
If you’re considering building your own home, talk to Valley’s construction loan experts to see if our single-close construction-to-permanent loan is right for you. Learn more about our single-close construction loans or contact us today. We’d love to help you build your dream home.