Interest rates can affect nearly every area of our lives – from retirement savings growth, to purchasing a new car, and the buying or building of a new home. And, when rates go up, the “cost” of borrowing money will also rise (with all other factors being equal).
Over the past decade or so, interest rates have been stuck at historical lows. This, in turn, has made it easier for many people to qualify for home loans – both new and existing – as well as to keep their monthly payments down.
But with the Federal Reserve’s talk of increasing rates in the near future, it could have a considerable impact on new home sales – including the building of new custom residences. Oftentimes, the financing of a custom home build will entail the buyer obtaining a construction loan.
These short-term loans (which usually run between 6 and 18 months) are used for the labor and materials costs, but not for the mortgage or the purchase of the land. It is then necessary to obtain a home mortgage if you plan to finance the actual cost of buying the house.
As an alternative, you may be able to secure a “two-time-close” loan. This is actually two separate loans – a construction loan for the home building expenses, and then a mortgage that pays off the construction loan by refinancing it into a permanent mortgage.
While there has been much talk about increasing interest rates, at the present time they are still considered extremely low. That being said, if you’ve been considering building a new custom home in Orlando or the surrounding Central Florida area, now may be a good time to move forward with the process, before interest rates go up.
If you would like to learn more about the process of taking your custom home ideas and turning them into reality, give us a call and set up a time to chat with one of our specialists either in person, online, or over the phone. We look forward to hearing from you.
Source:
Financial steps to building a house: The complete guide. The Mortgage Reports. https://themortgagereports.com/32688/complete-guide-to-building-a-house#process