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[ccassaday]

I think you are misunderstanding. With your payment being just interest it should be very low. Yes the payment will increase as your house progresses but no way should you have paid that much in interest payments unless that includes your down payment. Our construction loan is a one time close at the beginning. The downside is you have to pay extra if you go over. But with a good detailed bid you shouldn't. We had to go to a credit union as our regular bank does not do construction loans.

[151949]

This morning my DH spoke to someone at a local bank and she told him they make such a small amount on these construction loans that they don't bother to carry them. She recommended a bank to us. But that certainly makes it sound like what the sales lady told us was incorrect.

[ccassaday]

You defintly are misunderstanding. My suggestion is find a bank or credit union that does construction loans and sit down with them. My dad went in twice before we signed papers. They will be able to clarify. Interest only should be very small to start but should not exceed 4 or 5 hundred dollars a month. My dad even went over closing costs ect. No way we're closing costs that high.  Just as reference our loan will be for about 365k. 

[Carmie]

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@151949 wrote:

@ Carmie - thanks for the input. We have been going along thinking this was exactly as you describe it but then we spoke to the sales lady and she said $64,000  5 times over a 10 month period, at 4.1% interest would be payments of $2475 a month on the interest, to start out.And every time you make a payment to the builder the interest goes up. Of course , if our current  house sold in the meantime we would be able to stop that loan and pay cash, but we'd have to rent somewhere. We have pretty much decided this is just too rich for us, much as we loved the house. We were expecting the interest only payments to be a few hundred a month not a few thousand.

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That isn't right and not even close.  Could that be the total interest for the whole 10 month period?  That would make more sense.

It would be impossible to incur a  $2475 interest payment on $64,000 first draw.  Also impossible to incur a $2475 interest payment for the second draw which would be only $128,000 at 4.1% and so on.

The interest on the first draw of $64,000 would be less than $200 a month.

your interest payments would start out very low and go up a little with each draw made.

Somewhere there is a miscommunication between the lender and you.  I would schedule an appointment with a construction mortgage lender and they should be able to run a computer print out of your monthly payments on a $320,000 loan with five draws. It would Not be 100% accurate because the draws are dependent on how long it takes to build the house, but will give you a good idea.

The interest alone on a 30 year mortgage for a $320,000 would be  only $882.00 a month  to start at 4.1%

[Tigriss]

You should forget building and go into financing.  That is ridiculous.  WHen you fist wrote, I thought you were looking i Florida, so of course the ginancing is high because it is back to a seller's/builder's market.  I would look into buying one that is already built. Consider it recycling a whole home versus dumping one and building yet another home from scratch adding to the crowded market.  You are being green and environmentally friendly by purchasing a already built home, and you are saving all that money!

[Lucky Charm]

What you should/could do is, put your home on the market, if it sells, live in your trailer---no rent (maybe ground rent).  When your home sells, take cash in hand and go to your builder.

[Carmie]

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@Lucky Charm wrote:

What you should/could do is, put your home on the market, if it sells, live in your trailer---no rent (maybe ground rent).  When your home sells, take cash in hand and go to your builder.

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That would work if her settlement and occupancy was befor October 15.  The campgrounds in PA close on or about that date.  It would also be difficult to live in PA while your home was being built in FL.

She would not be there to keep an eye on things.  

When we built, we sold our home and stored most of our belongings in a storage unit and live in a small apartment for almost a year .until the house was built.  That made it easy and we had a bunch of cash for a down payment.

i imagine the OP will sell her camper and her home.

[ccassaday]

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@Carmie wrote:

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@Lucky Charm wrote:

What you should/could do is, put your home on the market, if it sells, live in your trailer---no rent (maybe ground rent).  When your home sells, take cash in hand and go to your builder.

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That would work if her settlement and occupancy was befor October 15.  The campgrounds in PA close on or about that date.  It would also be difficult to live in PA while your home was being built in FL.

She would not be there to keep an eye on things.  

When we built, we sold our home and stored most of our belongings in a storage unit and live in a small apartment for almost a year .until the house was built.  That made it easy and we had a bunch of cash for a down payment.

i imagine the OP will sell her camper and her home.

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My sister built a huge garage last year. It is seperate from their house garage. We have moved everything we can there. We are scheduled to break ground June 19th. Our current house will be up for sale probably the beginning of July. We then have to rent a apartment after it sells. We expect it to sell in a couple of days. We will probably have to rent from Aug until DEC. We were supposed to be completed by nov 16 but have had some delays.

[gidgetgh]

I can only just speak for me, but I would feel really uncomfortable taking out a construction loan for some builder to build a house I was going to buy. What if he starts the construction and never finishes it?  Aren't you out the money then?

If he's a builder he can take out his own construction loan, build the house and then I'll put a contract on it. He'll get his money when the house closes and then he can pay off his loan. 

There's just no way I would be his bank and that's what you'd essentially be doing. Again, what if he doesn't finish it. Then what?

Also, 10 months to build a house?  That seems really long to me. And you're financing the whole thing. 

Way too risky for me. 

[ECBG]

@151949,You only pay interest on the amount of money you draw from the bank, not the total amount of the loan, the rest of which sits in the bank.

I have built two houses and taught this.