Most new home buyers are confused when it comes to planning how to finance their new house. You may be planning to have your new house built and must be wondering if you should finance the construction or let the builder do it. Many builders may not be doing so, but others may be open to it if their customers ask for it. The following guide will answer your related questions and clear your doubts.
Advantages of Builder Financing
There are many advantages of the builder financing the construction. In this case, the finance will appear on the books of accounting for builders. As a homebuyer, you will be required only to get the permanent mortgage. You will avoid the complex processes involved in deciding between the 2 different mortgages and a combo mortgage.
Another advantage of choosing a builder that can finance the construction is that you will have the assurance from the beginning that your builder is financially strong and capable of completing the task. When the interest is accounting for builders, you will enjoy another advantage from this model. It will mean that your project is completed much faster. In other words, it is the builder who is paying the interest. So they will make every effort to ensure that the construction is completed at the earliest. You cannot expect the same speed of completion if you were to finance it yourself.
When choosing this mode to have your new home financed, you should follow certain precautions. The cost of financing must be included within the quoted price for the house. The builder will then be inclined to cover the risk over a longer period. The good thing for the builder is that they will eliminate the risk of uncertainties in the construction for you. Because the builder is financing the project and not you, they will have control over the construction period. This makes it more reasonable for them to take the risk.
Drawbacks of Builder-Financed Project
Besides the advantages, there are a few drawbacks too to following this model of financing your new house’s construction. Firstly, it is the builder who needs to have the title to the land so that they could obtain financing. When it comes to moving the title to your name, it can cost big in certain jurisdictions.
When you finance the construction, you will be in a better position to ask the builder to make the desired modifications. But when the project is builder-financed, they may show reluctance in adhering to your demands. When choosing a finance mode, it is important to note that the quote you get will have significant difference. So make sure to consider both sides of the coin before choosing the right finance model for your new house.