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Home building loan: how does it work?


Soliciting a mortgage for a house construction project requires respecting several fundamental stages, from the purchase of the land to the costing of the construction and the release of funds.

Home construction: stages of the mortgage

Home construction: stages of the mortgage

Each year, many borrowers embark on a detached house construction project, a real estate project consisting of buying land and asking a builder to erect the building. It is therefore necessary to start with an estimate of borrowing capacity, it is in fact a question of knowing the maximum amount that it is possible to obtain taking into account its financial situation. This information will help guide his field research but also to define the amount of construction. The buyer can thus adjust the envelope according to his project and his expectations.

It is important to start with the builder’s quote, this allows you to obtain the amount of the construction and to be able to orient your search for available land. After finding the land (serviced or not, servicing entails an additional cost), you must be able to block it quickly, this consists in signing a sales agreement involving obtaining a mortgage loan contract in a short time, on average between 45 days and 60 days. In general, this document requires entering a rate and a credit amount.

Real estate credit: reserved works and reimbursement

Real estate credit: reserved works and reimbursement

The offer of mortgage loan contract will finance the acquisition of the land but also the cost of construction, these are the two main elements that will be taken into account to define the amount of the total cost. Simply put, most individual house construction projects will require work, whether for connection to electricity, water, gas, but also to finish the house (walls, floors, exteriors). All this can be included in the financing, provided that an amount is added at the time of subscription.

On the credit repayment side, there are two options available to the borrower. Either he can repay as soon as he obtains financing with interim interest, or he can opt for deferred payment. The principle of interim interest is to start repaying interest each month corresponding to the manufacturer’s calls for funds. These interests are low at the start and will reach the total amount of the monthly payment at the end of the construction. The buyer can also decide to go on a deferred refund, he does not start the refund until the house is finished and he obtains the keys.

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