Interest-only loans aren’t necessarily bad. But they’re often used for the wrong reasons. If you’ve got a sound strategy for alternative uses for the extra money (and a plan for getting rid of the debt), then they can work well. Choosing an interest-only loan for the sole purpose of buying a more expensive home is a risky approach.

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In many cases, construction loans are also set up as interest-only loans. This means you only pay interest on the money you have borrowed instead of paying down any part of the principle loan balance. This makes payment of construction loans more feasible. You also pay only on the amount that has been paid out already.

Chapter 12 – Construction Loans – Construction loans made to the home owner borrower may be combined with a long-term loan that begins when construction is completed. Also called a construction-permanent loan. During construction loan period, borrower pays interest only. When construction loan period ends, loan converts to an amortized loan.

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Considering building a new home, but confused about the differences between construction loans and mortgages? Here’s a brief explanation. Contact us today!

The borrower might only be required to make interest payments on a construction loan while the project is still underway. Some construction loans may require the balance to be paid off entirely by the.

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The interest rates for a one lose construction loan usaully run 1% higher than a standard mortgage rate, so today they are running at 7%, thjis would be a 30 year loan giving you up to 9 months to complete the construction. There are also two close loans. The construction part would be an interest only loan usually prime plus 1 or 2%.

An interest-only mortgage is a loan where you make interest payments for an initial term at a fixed interest rate. The interest-only period typically lasts for 10 years and the total loan term is 30.

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