If we look at the trends related to the place of residence, we will surely notice that more and more people want to move from the city to the countryside or small towns. As a result, single-family houses are becoming more and more popular in our country. And it is known that if there is a big demand for something, its price automatically goes up. Therefore, not everyone can afford to buy a finished house. But people who necessarily want to live in their own home, have one more alternative. They can build a house like that. It certainly involves a lot of effort, also financial, but in general, the cost of building a house is lower than if you have already bought a finished house. But although the cost of building a house is lower than the cost of its purchase, we still have to spend a lot of money on such an investment. Therefore, most of us must “use” a bank loan.
Virtually every bank offers a loan to build a house. Simply put, this is a variant of a mortgage that differs in several details from a loan to purchase a ready-made property. These differences begin at the stage of completing documents. To such a conclusion, in addition to standard documents related to our creditworthiness, we will have to attach the ownership act of the plot on which the house will be built, the construction permit and, above all, the cost estimate for the construction. It is on the basis of a cost estimate that the bank will be able to assess how much money it can borrow. Sometimes banks use their own coefficients, allowing to determine the construction costs, and that’s why they base their calculations on them. Once we have all the documents completed, the bank must, of course, consider them and make a credit decision. If it is positive, nothing stands in the way of signing a loan agreement and starting or completing the construction. Although after signing the loan agreement, we will not get money at our disposal right away.
For the bank will require us to establish collateral. Usually it is about entering the bank into a mortgage or establishing an assignment from an insurance policy. Only after these formalities we have a chance for money. But we will not get all the money right away. In the case of loans for building a house, usually the money is paid by the bank in tranches. At the beginning, we will get some money, and the next part, only after the first settlement. The bank simply wants to be sure that the money we have received has been used in the right way. And so the cycle repeats itself until we use all the money. At the time when individual tranches of the loan are paid to us, we do not have to pay back capital installments but only interest installments. Only when all funds have been disbursed by the bank, we begin to pay off full capital and interest installments.