A Quick Guide To Different Types Of Construction Loans

Early on in the coronavirus pandemic, construction activity went way down. However, it has soared back to high numbers. In fact, the annual rate of new home construction in the United States is now more than 1.6 million!

With so many new homes being built, there are a lot of new construction loans being sought after. There are many different kinds of construction loans, so it can take some time to figure out which one is the best for each situation.

So how can you make sure that you are getting the best construction loan possible? Read on to learn all about the different kinds of construction loans!

Construction to Permanent

This type of loan combines your mortgage with your construction loan. That simplicity can save you a lot of time. If you don’t get a loan like this, there is a good chance that you will have to figure out what kind of mortgage loan to get down the road.

Instead, you can combine both of these loans into one. With a construction to permanent loan, once construction is complete, your loan will turn into a normal mortgage.

Most loans like this come with one-off closing costs. Generally, they will lock in a specific mortgage interest rate that will last for the duration of your mortgage.

Construction Only

Of course, sometimes the company that offers the best construction loan is not also offering the best mortgage loan. In that case, it can make more sense for you to pursue these two loans separately.

That leaves you with a construction-only loan. In loans like this, there are actually two times when you will pay closing costs.

The first time, you will pay closing costs when your property construction is complete. Then, when you get a mortgage, you will pay closing costs a second time.


In some cases, a pre-existing property just needs some renovation. In that case, you don’t need a loan for a full construction job. Instead, you need a simple renovation loan.

One of the advantages of the renovation loan is that you can use the future home as collateral. Since the home will be more valuable once it is renovated, that gives you a lot of collateral to work with.

Not everyone uses loans when they do renovations. Some people use home equity lines of credit or other funding methods.

When you are learning about different types of construction loans, it can help to talk to the experts in home construction loans. Finding someone to explain the details of renovation construction loans and construction mortgage loans can help you figure out which option is the right choice for you.

To learn more about construction loan rates and different construction loans, check out

Know All About Construction Loans

We hope that you were able to take away something helpful from this brief article on just a few of the main differences between different kinds of construction loans. It can be intimidating to jump into the world of construction loans. At the end of the day, you will be able to find the best deal for you when you know as much about the different kinds of loans available as possible.

To keep up-to-date on the latest information in business, homeownership, and more, have a look through our other articles!

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