When we are looking to buy a house, most of us need to borrow money with mortgage loans. This is because the houses are way too much money for us to buy it cash. There are a few people who can afford to buy their houses cash, but they are just a few. If you are one of the normal people who need to borrow money for buying house, you might need to know the difference between a construction loan and a mortgage loan. This article will help you in knowing the difference.
A construction loan is a loan that you need to get when you are building your own home. This is normally a short term contract. This contract is set for a time, for example a year. After the year when your house is build and done, you need to get another loan to pay off the construction loan.
This is a type of mortgage lending or loan, but with the exception that you must repay the loan fast, much faster than a mortgage loan.
The reason why you should consider a construction loan is because when you want to build a house, you can’t get a mortgage on the house, because there isn’t a house that you can get a loan for. It is better to apply for a construction loan and repay the loan when your house is fully built. See more Here.
You will need to apply for a mortgage loan when you want to buy a house that are already build and you can just move in. With a mortgage loan, you can pay off the loan in a number of years. Anything between ten and twenty years. It may be a long time to pay off, but it will be more affordable than trying to repay a construction loan.
If you want to buy a house and don’t think about building your own home, then a mortgage loan is your best and only option. This is the best way of getting a loan so that you can afford to own your own home.
The difference between construction loan and mortgage loan
You will need a construction loan when you want to build your own home. A mortgage loan is for when you are buying an already build home.
With a construction loan you are applying for a short-term loan that needs to be paid in full when your house is finished. A mortgage loan you are applying for a long-term loan and have a number of years to repay the loan.
You can’t apply for a mortgage when you want to build a new house, and you can’t get a construction loan when you want to buy a house that is already been build.
Most of us, who need to buy a home, will need to get some kind of loan. Houses are too expensive to buy it in cash. You need to know if you are going to build your own home, or if you are going to buy a house that is ready to move into. A mortgage broker will let you decide on the type of mortgage lending or loan that you should apply for.