What are the house construction bridge loan specifics?


A house construction bridge loan comes in two flavors.

Construction Only Loan

With this loan, money is extended for as long as construction is expected to be completed - usually from several months to a year. Amortization occurs as interest only, and at the end of the loan term, the whole house construction bridge loan becomes due. With this type of a loan, you will have to pay closing costs twice - once for the construction only loan, and once for a regular mortgage loan.

Construction Plus Regular Mortgage

A house construction bridge loan may combine both a construction loan and a permanent mortgage loan in one. The advantages are that closing costs are only paid once. The disadvantages - the rates are set before the house is ever complete, and there usually will be prepayment penalties if you decide to walk off. Unless you are not completely certain this is what you want to do, you'd better sign for two separate loans.

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