construction loans what you need to know

As a direct, private money lender, Capital Fund 1 is known for its remarkable commitment to fulfilling diverse real estate financing needs. Now, we’re excited to share more about our venture into new terrain: commercial construction loans.

With a history of successfully providing over $330 million in private capital and money loans to real estate investors since 2009, we see a window of opportunity to leverage our expertise in the face of numerous fallen-through commercial loans.

What is a Construction Loan?

A construction loan is a short-term, interim loan used to finance the cost of building a new commercial property or a residential building. Unlike traditional mortgages or loans, these are specifically tailored to suit the needs of new construction projects. With their unique loan structure and disbursement process, construction loans are designed to support the entire lifecycle of a construction project.

Construction Loans vs. Traditional Mortgages

Unlike a traditional mortgage, where the entire loan amount is disbursed upfront, a construction loan follows a draw schedule corresponding to different stages of the construction phase. This ensures that funds are available exactly when needed, without the burden of interest accumulating on the entire loan amount from day one.

Another distinction is that construction loans are short-term, usually extending up to a year or two. Once the project is completed, the borrower either pays off the loan or converts it into a traditional, long-term mortgage.

How Do Construction Loans Work?

The construction loan process begins with the borrower providing a detailed project plan and budget. The lender evaluates these documents and, if approved, agrees to loan a certain amount. This amount is disbursed in stages, known as “draws,” tied to the completion of different construction milestones. Interest is only charged on the amount drawn at each stage, not the total loan commitment.

AZ Construction Loans for Real Estate Investors

Our AZ commercial construction loans offer tangible benefits for real estate investors seeking to fund their investment properties. With quick funding, no credit requirements, and asset-based loans, we provide a seamless financing experience.

Offering monthly interest-only payments at rates between 9.9% to 13.9% and a term of 12 to 24 months, we lend up to 70% of the total project cost. Our loans come with minimum draw fees of $350 per draw and 2-3 points ($2,000 minimum), providing a streamlined, cost-effective funding solution.

Available Private Construction Loans from Capital Fund 1

Capital Fund 1 offers financial support for a wide array of construction projects, including ground-up residential, spec home construction, in-fill development, build to suit, and multi-unit developments.

Our private construction loans stand out for their flexibility. We know that construction projects are not one-size-fits-all and neither are their financial needs. So, we work with general contractors, developers, and investors to structure each loan to fit the unique needs of the project.

To get a quote on your construction deal, all we need is the loan amount requested, project plans, and project budget.

Benefits of Choosing Capital Fund 1 for Your Construction Loan in AZ

Choosing Capital Fund 1 for your construction loan in Arizona comes with a multitude of advantages. First, we are an asset-based lender, meaning our decisions are based on the property’s value, not your credit score. Second, we ensure a quick turnaround, often financing construction deals in as few as 3-5 business days.

Additionally, we don’t check credit, ask for personal tax returns, or impose prepayment penalties, offering maximum flexibility to our clients. Once you secure a long-term loan from another source, you can refinance your loan with us without any penalty.

Frequently Asked Questions About Construction Loans

What happens if my construction project goes over budget?

As with any project, it’s always wise to anticipate potential overruns and factor in additional contingencies in your initial budget. If the budget does exceed the original estimate, you, as the borrower, would typically be responsible for covering these costs. At Capital Fund 1, we offer flexible loan structures and can work with you to understand your options if this situation arises.

What are the risks associated with construction loans?

Construction loans inherently carry a degree of risk due to the complexity of construction projects. Potential risks include project delays, cost overruns, or a change in market conditions during the construction period. To mitigate these risks, it’s crucial to plan thoroughly and work with an experienced lender like Capital Fund 1 that understands the construction industry.

Do I need a down payment for a construction loan?

Yes, a down payment is typically required for a construction loan. The exact amount can vary, but it’s generally tied to the total project cost. Capital Fund 1 provides loans up to 70% of the total project cost, ensuring substantial financial support for your construction project.

Can I refinance a construction loan?

Yes, it’s common for borrowers to refinance their construction loan into a long-term mortgage once the project is completed. At Capital Fund 1, we don’t impose prepayment penalties, meaning you can refinance your loan at any point without any additional costs.

How quickly can I get a construction loan from Capital Fund 1?

At Capital Fund 1, we pride ourselves on quick and efficient funding. Once we have the necessary information about your project, we can finance construction deals in as little as 3-5 business days, ensuring you don’t miss out on any opportunities.

Secure Common-Sense Construction Financing with Capital Fund 1

In the shifting tides of real estate, finding a dependable financing partner is crucial. Capital Fund 1 stands committed to providing innovative, reliable, and speedy financial solutions for your construction projects. With our experienced team that understands the nuances of construction, we’re ready to make your project come alive.

Contact us today to discover how our private construction loans can accelerate your commercial business growth.

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