How does construction (A&A) loan works?

[Peng Jason 0]

Hi all,

I understand that Banks may loan up to 80% of the construction invoice/quotation.

After TOP,  the construction loan can be converted up to 80% of the value of the new house.

But I also read on this link and I am bit confused how it is calculated.

Can any kind soul advise?

Thanks,

 

 

[snoozee 98]

not sure if my understanding is correct or not as this is based on my hazy recollection from discussion with my banker > 1 year ago and what I had read in this forum.

You need to get a quotation from your builder/contractor on how much the construction cost will be at. The bank will also do a valuation of your house based on the approved design and then decide how much they can loan you, subjected to TDSR. if you have an existing home loan, the construction loan repayment installments and existing loan repayment installments must be below your TDSR, else the bank cannot loan you the 70% or 80% of the construction costs.

assuming that you can get a loan of up to 80% of the construction cost, this construction loan will be disbursed to you at current prime rate (which is about 5% interest). this prime rate will apply throughout the duration of your house construction process until you get TOP or CSC upon which the outstanding balance can be converted to your existing (if any) home loan at the home loan rates (currently about 2%). As TOP is usually obtained before CSC (though in cases both can be obtained at same time), it is better to get a construction loan which will allow you to do the conversion when you get TOP instead of CSC since CSC can be several months after TOP. this will allow you to save quite a bit on the interest you need to pay.

Again, I stress that the above might have some incorrect information so for more accurate information, best is talk to your banker.

[Peng Jason 0]

Thank much - I am quite clear now , same as what i understand.

[TacticalKarma 0]

On 3/13/2018 at 11:29 AM, Peng Jason said:

Hi all,

I understand that Banks may loan up to 80% of the construction invoice/quotation.

After TOP,  the construction loan can be converted up to 80% of the value of the new house.

But I also read on this link and I am bit confused how it is calculated.

Can any kind soul advise?

Thanks,

 

 

Hey, so personally I think that it's always depends on the politics of the company that doing that, since some of them differs from the others. However, once I had a problem with a house that I wanna build, so when I bought a place for a future house, I decided to take a loan for some construction work, so I builded it almost a year, and lately I discovered that I have a debt that I should pay to the office and in one day, guys from the debt collectors came to me and we discussed how can we solve this problem (they was pretty nice) (I guess this is the guys frontline-collections.com) . Since then I am trying not to take any loans in my life.

[GoodVictor 0]

Aren't construction loan rates higher than those of mortgage?

[Olivoil 0]

As far as I know, while your home is built, your costs are kept to the minimum. After that, the home loan will revert to principal interest. For this reason, I think it is more convenient to get a mortgage. The rates are lower for it and it is less risky. More than that, the construction loan is more complicated because you have to be extremely prepared with a construction plan, timetable and a budget that makes sense. Therefore, I suggest you get advice from Mortgage Advisor London concerning your issue. I'm sure they'll find an explication and a way out!

[Vodarado 0]

It's a very tricky subject!

[GoodVictor 0]

One thing I know, that we must pay a lot of attention to this subject. I'm not a big financial specialist, but I think we must consult professionals in this domain to make the right decision. Because of the decision made today we can suffer consequences tomorrow. So from my point of view, it's a very sensitive subject. For example, I use the services of Elems.co.uk. Their company is one of the best in our local market. The guys from there are always providing me the best solutions for my problems. So think about tomorrow and make the right decision!

[Brandcalfe 2]

I don't understand those either, In case someone is free to explain to me that, please, I will be grateful. Generally speaking for me getting a loan is so much pain and struggle. Sometimes I just don't want that loan anymore. I remembered last year I wanted to get a loan to buy a new car for me, but I didn't manage to get a loan for that. Luckily I got some help from a company called Mortgage Advice Grimsby, and now I am driving a new Mercedes, and I think they can help you too, with your problem. Have a nice one.

[daverdnob 0]

I have heard about this, I do not know how true the information is but it sounds quite useful to those who want to invest in construction. It is quite crucial that moment when you need money and you do not, so you can lose the whole business. I once when I needed a sum of money to invest I decided to another method. Having the oil business, I turned to oilfield factoring. So we had the necessary capital for the moment and invested. It may not be the perfect solution, but at that time it worked for me, which is important. Try to study both methods, and subsequently proceed to the most favorable to you

[maywarren 0]

If you don't have all the necessary funds for building your dream house, you're most likely going to need a construction loan. They're short-term loans that cover the cost of building a home. Construction loans are a bit more complex than the usual home loans. Instead of collecting funds as a single lump sum, it's paid out in draws. They also have numerous requirements, such as your credit score, the down payment, the construction plan, the contractor, and the lender review. These are all critical during this process. If you want help for securing a construction law, you should contact https://www.boutiquehomeplans.com/post/how-to-finance-your-new-home-construction-in-2028.

[Hissveome 0]

If you took a loan from a bank, I have bad news. They have their own rules when paying off a loan. If I were you, I would try to contact an economist who will help you. And best of all, you should call the bank and ask them this question. They will answer everything you. Therefore, I never dealt with banks if I needed a loan because I didn't trust them. They are constantly trying to make money from you. The last time I needed a loan to repair my house, and of course, the bank refused to grant me a loan. Then I decided to look at the rating of the best loans to date https://hurtigudbetaling.dk/. I like to make quick loans, and I hate lengthy registration procedures.

[Stormila 0]

I wanted to take out a loan to build a house, but I would have to fill out a large number of documents, and I didn't want that. Therefore, I still decided to take out a mortgage and no longer thought about taking money for construction. So I don't know exactly how it all works, but I know that banks are much stricter towards those who take out a loan to build something. And to get such a loan, you must have an ideal credit line. But suppose you still want to learn more about getting a loan for building a house. In that case, I advise you to contact mortgage advisors from this company -- Mortgage Advice Sunderland. At one time, this firm helped me get a mortgage.

[Judii 0]

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