A construction loan mortgage is a special kind of mortgage which will offer you some benefits if you are building a house. It will allow you access to some of the mortgage funds even before the house is built. It will also keep your interest costs low while you are in the process of building a house. It potentially can allow you to build a bigger more expensive house then if you used a traditional mortgage.

So you are going to build a house and like most people you don’t have enough cash in your bank account to pay for it. So you need a mortgage. But since there is no house yet you can’t get a mortgage because the value of what you want to borrow is much higher then the value of what you are buying. Even if you had 5 mortgages you wouldn’t be able to match the value until the house is actually built.

This is where a construction loan mortgage comes in. You only need to have enough money to pay for the first stage of construction (typically the foundation). Upon completion the bank will come in to inspect that this phase is indeed complete. They will then write you a check to cover this work. Which you can then use to complete the second phase, and so on until construction is complete. The mortgage will then convert into a traditional mortgage.

While you are in the construction phase of the project, a construction loan mortgage will only require that you make interest payments on the amount of principle that they have paid you so far. This will be a very manageable payment that you can work with during building.

If you had to front all the money to build your new house before you could get a mortgage then you’d likely not be able to afford to build a very big house. However by using a construction loan mortgage you only need to have enough cash to cover the first stage of building. This means you can build a much larger house then if you were just using a traditional mortgage.

So unless you have a lot of money on hand, if you are looking to build a house, you should definitely consider a construction loan mortgage. It’ll save you money and reduce your stress!