OPEN CLOSE
Real Estate. Reinvented.®
February 2015
By:
If you’re considering building a new home, how you finance the project is one of the most important considerations. We get many questions about how a Construction Permanent Mortgage works, and so Renee Bevan of Townebank explains 3 main advantages of their one time close product:
1. Reduces the purchase price of the home, usually by the amount the builder does not have to pay in closing costs and interest carry. This is offset by the increase in closing costs and interest carry for the buyer.
2. The buyer does have the ability to reduce their federal and state tax burden if they itemize their deductions. A buyer is allowed to deduct interest paid to construct or acquire a home for use as a primary or second residence. If your typical buyer is in the 28% or higher federal bracket and the 5.75% Virginia tax bracket, then the tax savings is estimated to be $1,300 for the buyer who borrows $300,000 in the example above. Please have your clients consult with their tax advisor for actual savings based on their income and tax bracket for both federal and state taxes.
3. It eliminates duplicated closing costs by combining the construction loan closing and the permanent loan closing into one. Savings include one settlement fee, not two, saving approximately $400-800. The title insurance cost would be reduced, as there would be only one title insurance policy, saving approximately $250. There would only be one origination fee, not two (one charged when the bank does the builder’s construction loan and one charged by the permanent lender doing the mortgage loan. Savings would be $3,000. Estimated total savings by doing one closing rather than two on a $300,000 transaction would be $3,650 to $4,050. Total savings in closing costs and tax breaks is estimated at $5,000 to $5,400 on a typical $300,000 loan amount when compared to a construction loan to the builder and a permanent loan to the buyer.
Visit LizMooreNewHomes.com today for more info, and drop me an email at liz@lizmoore.com if you would recommendations of reputable local lenders who offer construction permanent financing options.
