I started a blog series answering common home building questions. My goal is to provide you with a quick answer (300 words or less!) to a question and when I can, give you resources to find more information on the topic.
Today’s question is – what happens to my existing mortgage on the house I plan to tear down?
If you are planning to finance the construction of your new home, the construction loan amount will be the balance of the existing mortgage and the cost of construction. At the construction loan closing, the existing mortgage will be paid off and that will be the first “draw”. At that time you will start paying the interest only payment on the lot payoff amount. As the house is built, the builder will take draws throughout construction and you will pay the interest on the drawn amount (as more money is drawn, the monthly payment goes up).
For more detailed information about what goes into Construction Financing, check out THIS POST.
Construction lending can be confusing and tough to navigate. Need more information? Let us know and we can connect you to an experienced construction lender.
Dream Big. Build Smart.