For years, one-time-close loans were the name of the game for construction lenders. From practical benefits such as less paperwork to financial benefits like long-term rate protection and locked-in interest rates, this is what approximately 80 percent of borrowers end up choosing.
However, in the years since the housing crisis, two-time close loans have emerged as a viable alternative. How you finance your dream home depends on your individual situation. Kristina Albright, Residential Mortgage Sales Manager and Vice President of M&T Bank, sheds offers her thoughts on the subject.
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“The best decision depends on the customer’s ultimate goal, so it’s important they understand their options,” says Kristina. “Two-time close loans exist primarily to reduce risk for lenders and give borrowers more flexibility (for a cost). Say you’re building a new home and don’t want to sell your current home until the new one is complete. You also want to reduce the loan amount and potentially transfer from a 30-year mortgage to a 15-year before going into the permanent mortgage. In this case, a two-time close loan makes more sense.”
Keep in mind that a two-time closing means double the closing costs (a down payment with closing costs as well as a second closing of the permanent mortgage, or “end loan”). If you want more security in the end mortgage rate and are comfortable with the terms and conditions initially established with the loan, then a one-time close makes more sense.
From design to decor, a custom log home reflects your desires; make sure your financing fits your needs as well.
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