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[house_cat]

I'll be retiring in June and we're relocating to another state.  We'll be having a house built in the spring, but Ideally, I'll be closing on my current house in May or June. 

I'm assuming we will need money before then to start the building process.  A friend of mine mentioned a construction/building loan for the interim.  Does anyone have experience with this type of loan?  Is it simply a second mortgage or is there more to it than that?

Any light you can shed on this will be helpful. I'm a little overwhelmed with "to dos" right now.

Thank you.

[Sooner]

@house_cat Many (most?) builders will hook you up with a loan company they use and rely on.  Do you have a builder in mind?

Before we moved we qualified for another house, knowing we would still be selling our old one probably after the move.

Talk to lenders and talk to builders is my advice.

[house_cat]

@Sooner 

Yes. We know the builder who will be working with us.  He mentioned a construction loan to my husband, but I guess because it's still early on, they didn't discuss details. I wasn't sure if I was supposed to figure that all out here on this end.  It will be nice if the builder knows the system and can streamline it for us.

[ScrapHappy]

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@house_cat wrote:

I'll be retiring in June and we're relocating to another state.  We'll be having a house built in the spring, but Ideally, I'll be closing on my current house in May or June. 

I'm assuming we will need money before then to start the building process.  A friend of mine mentioned a construction/building loan for the interim.  Does anyone have experience with this type of loan?  Is it simply a second mortgage or is there more to it than that?

Any light you can shed on this will be helpful. I'm a little overwhelmed with "to dos" right now.

Thank you.

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I don't know about construction/building loans but when we moved from California to the Southeast you purchased a home before we sold our old home.  We had to prove to lender that we could carry both mortgages until our California home sold.

[house_cat]

@ScrapHappy 

We're hoping to rid ourselves of the mortgage by moving to a place with a lower cost of living.  However, I understand what you're saying. If this house didn't sell we would have to mortgage the new home.... like I need reasons to lose sleep...

[Somertime]

@house_cat   From my personal experience, I owned the land and had a house built.  I applied for a mortgage before construction and was approved.  It became a construction loan and the bank paid the builder in increments once the bank inspected.  Example:  land cleared, foundation laid, permits obtained - 25%, electrical, plumbing, cinder blocks, roof-25%, dry wall, HVAC - 25% and on final inspection -25%.  Once you go to closing, it converts to a regular mortgage.

Your downpayment will be used up first before the bank's funds.

[Etoile308]

I don't know if laws in all states are similar, when I took out a construction loan it was basically the same as a regular mortgage. The difference is on the part of the financer. Money was released in stages to the builder as the construction progressed and was inspected. As oppose to a financer paying entire amount to a seller upon sale of existing home.

Upon completion it was a regular mortgage payment. I had put down 20% initially before construction started as a down payment and paid for all up grades as they arose.

[house_cat]

@Somertime 

@Etoile308 

Thank you for that very interesting information. Can I assume that I can pay it off in one lump sum when I sell this house?

[Etoile308]

If that's what you want to do it shouldnt be a problem. Just make certain you finance with someone that does not penalize for you for early prepayment on the loan.

Then you need to contact your insurance company and local government agency to whom you pay property tax and have them bill you directly since those payments will no longer be rolled into a mortgage.

[house_cat]

@Etoile308 

Thank you.