Florida construction projects are the work that builds our communities. Whether you’re looking to build or renovate your home, a business, or other structure, it’s important to understand the financing options available to you before committing to any loan options.
When people seek out financing for a construction project, it’s often the first time they’ve ever heard the terms “single-close” or “multi-close” loans. Construction jobs generally require (at least) two loans or terms: a construction loan that funds the work over the time of the job and then a term that extends long-term like a 30-year mortgage. As you weigh your options, we want to help you understand what each of these options is so you are able to proceed with clarity and confidence.
What is a Single-Close Construction Loan?
A single-close construction loan is a process that streamlines securing construction financing into a single transaction. It consolidates the construction phase financing and the subsequent long-term mortgage into one comprehensive loan application and closing. Upon the completion of construction, the initial loan transitions into a traditional mortgage, hence the alternate names “all-in-one” or “construction-to-permanent” (CTP) loans.
The appeal of single-close loans lies in their simplicity and cost-effectiveness. Applicants face just one set of paperwork and one closing event, significantly cutting down on administrative burdens and closing costs. Moreover, the security of knowing your long-term mortgage’s terms and interest rates upfront eliminates the uncertainties that come with securing additional financing post-construction.
What is a Multi-Close Construction Loan?
In contrast, multi-close construction loans introduce a degree of flexibility to the construction loan process. This model necessitates obtaining two distinct loans: one for the construction phase and another for the long-term mortgage that refinances the initial loan upon project completion. The first loan covers construction costs, while the second, secured post-construction, transitions the financial commitment into a 15 or 30-year mortgage.
Opting for a multi-close loan opens up additional possibilities that could lower costs, but it comes at the expense of certainty. Although it involves more steps, with separate approvals and closings for each phase, this route can offer lower rates and more favorable terms for the long-term mortgage. It caters to those willing to take on the uncertainty of a second approval process while preparing for potential financial or project changes that could lead to better loan conditions down the line.
Proceed With CertaintyAt Florida Construction Law Group, we are ready to help the hard-working people of Florida through the construction loan process. We understand the weight of these financial decisions, and we are committed to guiding you toward the financing option that best suits your project’s needs and your financial situation. Contact our team to schedule a consultation and get started on the road toward making the most informed choice possible.
