![]() The stand-alone would allow this borrower to put more money down once they sell their existing home – which they could not do with the other loan type. One benefit of the stand-alone loan is for people who already own a property and may be looking to sell it when their build is completed. The clear benefit it has over the other, is the single set of closing costs to get the full loan amount, and an ability to fix the interest rate earlier. This loan type will usually require more of the borrower, in terms of down payments and credit scores. Construction-to-permanent loans: a more common type of real estate loan, this one will combine the two loans (build, mortgage) into one 30-year loan at a fixed rate.The payments made during the build are interest-only, and then you settle your balance as you roll the principal into your 30-year, fixed-rate mortgage. ![]() The interest rate is variable during the build period and becomes fixed for the mortgage part of it. You will usually have two sets of closing (and associated costs) with this loan type – at the beginning, and then again as you refinance the larger mortgage. But the unique trait here, is the construction loan is handled as a separate loan to the mortgage that follows – the lender uses the first loan, to get you locked into securing the larger second one.
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