New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

Converting a construction loan

Q. What's the best strategy for converting a construction loan?

You should take out a mortgage to pay off the construction loan. Construction loans aren't meant to be a method of long-term financing. A first mortgage is a better choice than a home equity loan because you can borrow for longer periods, generally at a lower interest rate.

A typical home equity loan is a second mortgage. It carries a higher interest rate than a first mortgage because there is more risk to the lender. That's because the first mortgage has to be satisfied before any sale proceeds go toward satisfying the second mortgage. With no other lender having priority in the event of foreclosure, you've given the home equity lender all the benefits of being the primary lender.

Ask yourself, "What's in it for me?" It comes down to the loan terms. You should get better terms on a first mortgage than you would on a home equity loan.

See Also
FAQ: How construction loans work
FAQ: Rate locks
FAQ: Construction-to-permanent loans
FAQ: Strategies for financing a major home renovation
FAQ: Interest paid on a construction loan
FAQ: Financing the building of a new home

Print   E-mail

Home Equity
Compare today's rates
NATIONAL OVERNIGHT AVERAGES
$30K HELOC 4.38%
$50K HELOC 4.11%
$30K Home equity loan 4.99%
Rates may include points



Powered by:
What's Your Home Worth?
Get a free estimate of the value of your home.
  Enter Street Address:
Enter ZIP Code:
 

- advertisement -

Print   E-mail

30 yr fixed mtg 4.30%
48 month new car loan 3.16%
1 yr CD 0.67%
Alerts


MORE ON THE FED
Fed keeps rates steady  
Quiz: Figuring out the Federal Reserve  
Fed winners and losers  
Fed Outlook blog

Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
VIEW MORE CALCULATORS
BASICS SERIES
Checking Basics
Manage your account in a fee-friendly way.
What's the best checking
account for me?
ABCs of ATMs
What are all these fees?
Is online banking secure?

MORE ON BANKRATE
Ask the experts  
Frugal $ense contest  
Quizzes  
Form Letters


- advertisement -
 
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.