How Does Construction Permanent Financing Work?

Construction permanent financing is a method of financing available for the construction of your new home.


How Does it Work?

Essentially, it works as a line of credit that the builder uses to construct your new semi-custom home in Maryland. It’s structured in phases, allowing construction to progress at a structured rate. For example, after phase one of construction is complete, the builder calls for a draw of funds. An inspector from the bank comes to the property, determines that the phase has been finished, and allows for a disbursement of funds to continue with the next phase of construction. This continues until construction is finished. When the semi-custom home is complete, the bank holds back 10% of the construction amount until the builder supplies necessary documentation and the county issues the use and occupancy permit. The bank then releases these funds, and the loan is converted into permanent financing.


How Does Construction Permanent Financing Benefit Me?

There are several benefits of construction permanent financing, many of them having to do with tax savings. (Make sure to always consult your tax adviser.)

This type of financing allows you to save on transfer tax, which is a part of the closing cost on any home. Because you are taking out a construction loan, you close on the property before the home is built. This means the tax is assessed on the price of the lot, not the construction, which results in significant savings compared to purchasing an already finished home.

Another tax benefit comes about as a result of the structured nature of the loan. Because the loan payment is structured in phases, you only have to pay interest on the amount drawn out per phase, not on the entire loan. You also save on a construction permanent loan vs. a commercial line of credit, because a builder would include the additional costs of the latter in the final sales price. For more information, don’t hesitate to contact us today.

construction permanent financing

About the Lifetime Series Homes by Mueller Homes

The Lifetime Series Homes by Mueller Homes are a series of semi-custom house designs that were created with the intention of providing home buyers with new option when it comes to shopping for a home. The Lifetimes series includes 14 home templates including, 2 story, first floor master, and ranchers that are pre-designed and ready to build. Because they are ready to build, clients save significant time and money that would have gone into designing a custom home, yet with the Lifetime Series by Muller Homes, clients still get the build quality, attention to detail, and communication that comes with working with a custom home builder. We serve the central Maryland area, and also provide assistance with lot acquisition, evaluation, and home buying finance. Keep up with us on our blog as well as on FacebookTwitterGoogle+Pinterest and YouTube.


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