Interim Construction Loans
June 29th, 2011
In essence, Interim Construction loans are a type of loan primarily used home and building construction. Contractors are paid with the loan proceeds are for labor and materials used to build the home. These loans only cover the time period for the completion of the house. In most cases, the builder can apply draws for the different stages of completion. During the building process, only interest payments are required.
Once the building is completed, the interim construction loan is made into a permanent mortgage loan, which is normally done by a mortgage company. Another thing to note about interim construction loans is that some interim construction lenders would ask for a “take-out” otherwise known as commitment letter from the primary mortgage provider before the approval of interim applications.
The commitment letter usually includes a stipulation which shows that the permanent mortgage company will be the one responsible for paying off the interim construction unsecured personal loans once the home building is completed. Interim construction loans can be transferred either to the builder or the homeowner. If the homeowner chooses to take the loan, the interest payment will be income tax deductible.
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