The Differences between Bridge, Construction and Rehab Loans
For a potential borrowers seeking monetary assistance for purchasing a home or constructing a building, there are many different types of loans out there and maneuvering through each one can be difficult. The task of choosing what type of loan will suit your needs can be daunting. In general, there are three loans that are many borrower’s go to’s. These include bridge loans, construction loans and rehab loans.
Bridge Loan Chicago
Bridge loans are most commonly used as a temporary means of finance for an individual or business until permanent financing is established. When a home buyer is purchasing a home before selling an existing home, a frequent way to secure the down payment for the new home is through a bridge loan. Bridge loans bridge the gap between the sales price of a new home and a home buyer’s new mortgage, in case the buyer’s home has not yet been sold. The funds from the bridge loan can then be used as a down payment on the new home. Rates for a bridge loan in Chicago usually vary and depend on the lender.
Construction Loan Chicago
Construction loans are not standardized as mortgage loans are standardized, but typically a construction loan will require interest-only payments during construction and become fully due upon completion. Completion is defined as a house that has acquired its certificate of occupancy. Numerous homeowners tend to use financing programs where the construction loan is converted to a mortgage loan after completion of construction. The advantage is that at time of completion, you only have to have one application and one closing. A construction loan, unlike a mortgage loan, is not meant to be around for a long time and a construction loan in Chicago will usually vary in terms of length of lending period and rates.
Rehab Loans Chicago
A rehab loan is a loan that is used mainly in the rehabilitation of homes or buildings. These types of loans may be made through traditional lenders but can also be insured by a government agency. The government sees the investment as a beneficial way to rehabilitate and revitalize neighborhoods by way of remodeling. There are numerous types of rehab loans depending on what type of loan and the amount you are seeking from a lender. However, they all have one central thing in common: to transform an existing property so that it is worth more once remodeled than it was when initially purchased. As with all other loans, rates for rehab loans in Chicago will normally vary depending on the lender.
Purchasing a new home, constructing a building, or remodeling a property can be an exciting time. Seeking the proper loan for your project is important and understanding the differences between each is vital. Take the time to become informed on what you need and better secure your investment.