Compare the offerings of a combination loan from various lenders to get the highest savings. In the initial stage, a combination loan is a construction loan. In this stage, your lender draws the checks favoring your builder and their subcontractors, when they successfully complete major steps in constructing the building. As your home is nearly completed, the construction loan is replaced by a traditional mortgage.
The new loan repays your construction loan and deposits the remaining into the estimated worth of the new property. A combination loan gets rid of the new set of closing costs and thus saves your money. By opting for both the offers at the same time, you and your lender save a lot of time and money. As a result, the lenders can easily give you these savings by offering preferred rates.
The commercial division of the various banks takes care of construction loans and the consumer division handles the mortgages. Hence consulting the branch manager of the banks whose offices are located in your vicinity to get the best offer, is your best bet. Unlike normal mortgages that can be applied on the phone or the Internet, need to be personally supervised.
But many commercial lenders love this chance as it enables them to get a grip in the communities. To understand the value of this offer, the commercial banker dealing with your quote for the construction loan can get their higher-ups to offer you a more favorable quote for your final mortgage.
When it comes to looking around for construction loans, remember the commercial lender will levy a steep administration fee as their charges for the step-by-step supervising of your construction procedure. At times, this fee can be 3, 4 or 5 points (percentage points of your home’s worth). As there is a lot of work involved in dealing with builders and subcontractors, many a times, the administration fees are worth it as you are free to use your time for more constructive activities. Also to motivate you to retain your entire business with them, most banks will actually refund major part of the administration fee when it is time to opt for a mortgage. You can get a regular mortgage with zero points or you can get rebate points that you can apply to the principal.
In your entire planning process, consult local banking professionals and your builders to get the good experiences they had with your prospective lenders.