Construction Loan Down Payment

To the extent you are seeking more information about obtaining a construction loan, it is highly likely that you may have an interest in trying to figure out what kind of construction loan down payment you will need to make. As you may or may not know, your construction loan choices include the 30 year fixed, 15 year fixed, 1 year ARM, 3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM and to a certain extent — interest-only loans. Although, many of these interest-only loans have been phased out in recent years. Generally speaking, your construction loan down payment will equal approximately 20% to 30% of the total amount of money you are seeking to borrow.

A Construction Loan Down Payment Can Be less Than You Think

There are no real hard and fast rules — some lenders have a better working relationship the individuals and companies who are seeking loans from them and so they may require less of a down payment. This is especially true in a situation where the lender does not perceive that there will be a great deal of risk with the construction project. At a minimum, you are likely to be expected to pay a 10% construction loan down payment unless other arrangements are made.

Given the fact that interest rates remain at historically low levels, there is a great deal of interest in trying to lock in a fixed loan interest rate. This makes a lot of sense, but it also probably makes sense to pay a reasonable construction loan down payment so that you have some equity built into the project. You do not want to find yourself in a situation where you are simply paying interest that is variable and that is likely to go up in the years ahead as interest rates rise.

Shop For Your Construction Loan Down Payment Amount

It is certainly recommended that you shop around to get the very best construction loan deal possible, including paying the least amount of money in the way of a construction loan down payment. This will give you more working capital to devote to the actual construction work and will help preserve whatever cash you may have set aside for the work that is going to be done.

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