Construction credits are usually contracted by owners or by a home buyer with own construction. These are short-term loans that are usually only granted for a one-year period. Once the construction of the house is complete, the borrower can either refinance the construction loan in a long-term mortgage or obtain a new loan to repay the construction loan (sometimes called a “final loan”). The borrower can only be required to pay interest on a construction loan while the project is still in progress. For some construction loans, the balance may need to be fully repaid before the end of the project. Depending on the location of the property and the details of the transaction, there may be other guarantees required by the construction lender, such as. B guarantees relating to payments made by the borrower to third parties. For example, if the improvements to be put in place are based on adjacent land that is not in the borrower`s possession and is the subject of a parking agreement between the borrower and the owner of the adjacent land, the lender may require a guarantee of payment and benefits for this parking contract (in addition to some sort of recognition contract with the neighbouring owner). In addition, the condominium lender in some jurisdictions, such as Florida, where the developer may have the right to use condominiums for construction costs, may require a deposit guarantee to cover any shortfall in credits that have been budgeted for construction costs but have not been obtained by the contracts until an agreed date.
A construction loan (also known as a “self-build loan”) is a short-term loan to finance the construction of a house or other real estate project. The owner or homebuyer borrows a construction loan to cover project costs before obtaining long-term financing. Because they are considered relatively risky, construction loans generally have higher interest rates than traditional mortgages. The terms of the guarantee probably provide that the lender is moderately able to ensure that the project is carried out by the guarantor. However, the agreement of the lender, The fact that the surety has cured all defaults of the loan contract, with the possible exception of defaults that are personal to the borrower and can not be cured by a third party, and without default of payment relating exclusively to the non-execution of the project which, by the provision of the deposit as part of the closing guarantee , and (y) payment guarantee as part of the closing guarantee and (y) payment terms under the loan agreement payment contract. As a general rule, the guarantee ends with the free conclusion of the project and all legal deadlines for the presentation of the pawn rights have expired and the necessary conditions to complete the conclusion and receipt of the final advance of the loan under the loan contract are met.