What Are Construction Loans in New York and How Do They Work?

construction workers on a commercial land
The construction industry is one of the most lucrative businesses in New York, despite the challenges of competition, spontaneity, and seasonality. It saw the biggest-ever record of private-sector construction in 2020, with over $1.14 trillion spent on property development.

 

If you own a construction business or want to enter this market, construction loans can offer a multitude of benefits to your company.

 

What Are Construction Loans?

Commercial business owners and builders can acquire a construction loan to cover the cost of purchasing, renovating, or developing a property. These properties can include multi-family real estate, hotels, warehouses, office buildings, etc. It's a short-term loan that requires a series of payments instead of the lump-sum repayment at the beginning paid in mortgage loans.

 

Construction financing covers the following expenses of a commercial property:

· Land acquisition

· Construction materials

· External displays such as signage

· Renovations

· Labor

· Permanent fixtures

· Closing costs

· Appliances

However, they don't cover furnishings and interior décor.

 

How Construction Loans Work

Construction loans involve a higher risk for lenders because there's no existing property to serve as collateral for the loan. Commercial lenders ask for a down payment of up to 20%, depending on the property, to cover the risks. Construction loans last for 6–24 months and can be refinanced to a long-term mortgage loan once the property is constructed.

 

Since there is more risk involved in these types of loans, the interest rates are also higher, but borrowers with a good record and financial situation may get reduced rates. The borrower has to make a series of payments during the construction at specified intervals. Depending on the lender, you may get customized repayment options instead of a rigid and fixed schedule.

 

Construction loan repayments only include interest and not principal, and the interest is only accrued to drawn funds. For example, If you get a loan for $50,000 and draw $10,000, interest will only apply to the drawn amount of funds.

commercial lender talking on the phone

Secure Your Loan Today

Global Capital Partners Fund is a reliable company for commercial financing in New York and other states like Michigan, Florida, Virginia, etc. They offer land acquisition and development loans, interim construction loans, takeout loans, and mini-perm loans for construction. Visit their website to learn more about their funding programs or contact them.

Comments

Post a Comment

Popular posts from this blog

3 Things To Consider When Applying For Private Lending

Image
  Whether you want to  invest in commercial real estate  or acquire a business, sorting out a suitable funding option is a must. Many business owners consider private lending to finance various projects. But with several money lenders in the market, it can be difficult to identify the best deal. Hence, we have compiled a list of the top three things to consider before applying for private lending. Global Capital Partners Fund is a reputable private lending organization that offers various financial solutions to businesses in Tenessee , Washington , Virginia , and many other states in America. The company is popular for asset-based lending , bridge financing , mortgage lending , and many other affordable financing options. Make sure to keep these top three things in mind while applying for private lending. 1.   Know The Interest Fees And Rate Private lenders typically charge higher interest rates than traditional lenders such as banks, so it's important to carefully r...
Read more

How Can Bridge Financing Help Your Business in Annapolis, MD?

Image
  A bridge loan  is a short-term financing option that helps businesses meet their immediate obligations before they secure a long-term finance facility. It is widely used by companies in the commercial real estate sector, where they need quick cash to take advantage of a lucrative real estate investment opportunity. Here's how you can use bridge loan financing  as a short-term financing solution for your business in Annapolis, MD.   Purchase Real Estate If you're looking to grow your business and want to purchase a new facility, bridge loan financing can provide you with the necessary financial impetus to help you with your purchase. Conventional financial institutions and banks have strict lending requirements for funding commercial real estate. They will conduct a comprehensive review of your financials, conduct property appraisals and inspections, and then provide you with approval.    Time is of the essence when securing a viable commercial space, and...
Read more

5 Real Estate Investment Challenges and How to Deal with them

Image
  Real estate investment involves the process of buying a property and then renting it out to generate income. The major concern during this process is the amount of money required for a particular property. This guide will discuss common challenges investors face in the real estate industry and how a lending company can help. Market Volatility A challenge that real estate investors commonly face is market volatility. Despite the tremendous real estate opportunities , uncertainty in the market due to multiple reasons makes the situation difficult for investors. However, this issue can be addressed depending on the investor’s strategy. For instance, they can opt for a stable investment opportunity rather than jumping into uncertain situations. Property Valuation Decision analytics before investing in real estate offers a comprehensive report, answering the investor’s queries and analyzing the potential risks. Poor property valuation prevents investors from ...
Read more