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A construction loan functions as an interest-only loan for the duration of the original land acquisition and construction. Upon reaching each significant construction objective, specific drawdown payments are made. This occurs at intervals as the project continues till the conclusion. By their very nature, projects seeking construction financing will create no profit until the completion and occupation of the project. Unless, of course, the price of land rises.
Many banks and other significant lenders won’t finance building loans since a property under development doesn’t generate money, despite the fact that this is painfully ludicrous. Here at Mortgage Chocolate, we think that such rules shouldn’t be something that our borrowers have to fight with. We believe that a project that has the potential to be profitable deserves funding.
