A modular building or off-site construction is the new thin in the construction industry, there are similarities between building onsite and off-site, however, the whole process is different. Modular building has several advantages such as cost efficiency, cost/ quality control, safety, minimal interruptions as well as predictability of cost. There are, however challenges associated with modular buildings one of the challenges is the availability of finances. Here are some of the ways to finance your modular building project.
- Self-financing
This is considered the simplest and cheapest way to finance your project; however, the vast majority of people lack the finances to finance their building projects from the pocket. Let’s be honest a building project isn’t cheap and requires quite a lot of money. However, if you have the money at hand then all you need is to pay for the construction and soon you will have your project complete and ready for use.
- Lending institutions
Taking a loan from your bank or credit union is the other way of financing your modular building project. Banks will require you to provide them with specific details for them to grant you a loan. Most banks will be ready to offer you a non-binding estimate which will be based on your credit check as well as the value of your assets. When banks finance modular building projects, they offer you a two-stage loan also known as the construction to permanent loans. During the construction, you will be required to make interest-only payments but once the construction is over, the loan becomes a permanent mortgage and you will be required to make payments for the whole loan.
Steps to take for the bank to finance your modular building project
Get an estimated figure The very first step is to make a rough estimate of the amount of money you think you will spend on your construction project. Go to your bank with your figure and provide them with your financial information as well as your credit history. The bank in return will give you an estimate of the amount of money they are willing to lend you along with their interest rates and fees. The provided estimates are non-binding for both you and the bank.
Compare the banks
Go to different banks with your estimate and let them give you their quotes, compare the quotes from the different banks. Be keen in your comparison a tiny detail could be worth thousands of dollars in the long run. Choose the bank with the best offer.
Apply for the loan
Once you are done with planning, you will need to apply for the loan, ensure that you have all the required documents. Once the bank is satisfied, they will send you a letter of commitment showing their approval. You will then establish a timeline for the payments, the bank will only release the payment once the task is completed to their satisfaction.
Closing on the loan
Once the disbursement schedule has been agreed upon, the loan will be closed with you paying the closing costs. You can then go ahead with your project to build your modular building. All the time during the construction, you will not pay against the principal, only against the interest.
The construction loan becomes a permanent mortgage
When the building is completed and everything is to satisfaction, the loan will become a permanent mortgage. You will then start making payments against the full loan, the principal and the interest. The countdown for the repayment of your mortgage started when the loan was closed. This means that your average monthly payments are going to be higher since the construction period was part of the loan repayment period but no payments were made.
