Home Construction Loans in NH
All construction loan programs in NH accomplish the same thing: They provide the funds needed to construct your new home on a predetermined disbursement schedule. The construction loan can be used to purchase the land on which you would like to build. If you already own the land but have a mortgage on it, the construction loan can pay off your existing loan at the start of the construction process.
Down payment requirements vary in New Hampshire. But if you hire a builder to construct your new home, expect to put down about 15% of the project cost. If you want to build the home yourself as the general contractor, it’s advisable to have at least 20% of your own money to contribute to the transaction.
Single-Close vs. Double-Close Construction Loans: Which Is Best for You?
All construction loan programs require a “closing,” at which you sign all the temporary loan documents that define your financing terms during the construction of your new home. At the end of the construction period, your construction loan must be made into a permanent “end” loan.
- In a “single-close” program, this conversion is called a “modification”; it is based on terms that were agreed upon before the start of the construction.
- In a “double-close” program, this conversion is more easily understood as a “refinance”; the borrower can decide the loan amount, interest rate, and other terms of the end loan after the construction is completed.
So which type of loan is best for your specific circumstances?
Here’s why a single-close construction loan might be right for you:
- There is only one closing. Because the conversion at the end is a modification, it may not require a visit to the closing attorney’s office.
- Closing costs are lower because there are no duplicate fees.
- The end loan is guaranteed.
- The end loan interest rate is guaranteed.
- You do not have to make loan payments during the construction period.
On the other hand, a double-close construction loan also offers a number of advantages:
- The fees for a double-close loan are within a few hundred dollars of those for a single-close loan.
- The end loan can be preapproved with a rate guarantee.
- You can roll the interest payments onto the loan (which is better than paying the interest up front).
- You will get a much better interest rate on your end loan when it is not directly attached to your construction loan. This may save you tens of thousands of dollars in interest.
Construction Loans: The Bottom Line
Overall, there is little difference between the single-close and double-close construction programs. Still, one program may work a little better than the other for you, depending on your unique circumstances. Also, in some cases, a construction loan may not be the best way to finance the construction of your new home. We might have a less expensive alternative for you.
If you are interested in a construction loan please contact Charley at (603) 471-9300 or via email to get started with rates and information.
Your information will be kept completely private.