Learn more about new construction loans with some of Groundfloor’s frequently asked questions.
The interest charged is just on the drawn funds.
Yes, we require the permit to be in hand. However, we can consider a land-only loan to help you secure the property during the permitting process.
While you don’t need to show experience in new construction, you need to show experience with 4+ real estate projects (rehabs or rentals) over the past 5 years.
No, we do not have funding mechanism for horizontal build costs. Ideally, we look for infill scenarios.
A new construction loan is a type of financing designed specifically for individuals or businesses looking to build a new structure or remodel an existing one by taking it down to the foundation.
This loan offers interest only on disbursed funds and a deferred payment program.
Our new construction loans operate slightly differently than our renovation loans. Borrowers must have experience with a minimum of 4 real estate projects in the last 5 years. These projects can be flips, rentals, or new construction. The loans fund different percentages of the construction based on the tier in which the borrower falls.
We also request additional documents for this type of loan. These documents include a bank statement, a general contractor license, and the contract you have with your general contractor. While they are not part of the loan, we still need to confirm there is a contract in place.
Once a loan is approved, the borrower is able to access the full amount of the loan in a series of draws. Interest accrues on the loan as it is used.
As is the case with all loans we offer, rates are risk-adjusted based on the creditworthiness of the borrower and the value of the collateral relative to the loan balance.
In general, we have found that borrowers who take out a new construction loan are more experienced and have a greater financial capacity than a typical renovator.
Furthermore, new construction projects overall are less risky than a renovations because they’re essentially a clean slate — often with renovation projects, you run into issues that you weren’t expecting; with new construction, you’re more aware of all contingencies because you’re starting from the ground up.
Finally, the current market for these types of loans is wide open. For the most part, builders have to turn to banks or larger non-bank lenders in order to receive loans for their new construction projects. True to our mission of creating a radically open, decentralized, and accessible capital market, we saw an opportunity for Groundfloor to step in and change the game.
New Construction Loans?
© 2024 Groundfloor. All rights reserved.