What is the final loan?

The end loan is a type of loan that is used to balance the balance remaining in any type of short -term building loan. With many forms of building loans, the principal payment is delayed until the construction is completed. With the final loan, there is also the possibility to continue paying interest for a period of time after construction, even if the loan begins to amortize.

The very common model is the use of the only creditor to create a building loan that is associated with the final loan. During the actual construction period, the debtor is obliged to make interest payments to the creditor. Upon completion of construction, the debtor will become responsible for making payments that cover the interest and the main. At this point, the debtor decides to repay the remaining balance due to the building loan to the new debt tool, the final loan.

There are several potential advantages for this type of arrangement. With the final loan it is possible to expand the advantage only to pay interest for a while, perhaps anywhere between a year to five LEyou. This advantage may be particularly important if the participating construction was for a commercial building and the owner requires another time to rent each unit in the building. Since only interest payments are needed in the first months of operation, the owner has time to fill the capacity and create a flow of income that can be easily used to repay the final loan according to the conditions.

Another advantage for the final loan is that the interest rate can be slightly better than the rate of the original building loan. This is especially true if the property has appreciated the value and the employment relationship between the debtor and the creditor as a satisfactory projection of the party. Since the debtor could always freely look for a new loan elsewhere to leave the building loan, the creditor can expand the more attractive interest rate as a means of maintaining the debtor's business.

Along with the advantages, there are also some potential disadvantages of final loans. Since the loan balance will begin onCamily amortize, it will only be decided to make interest payments for a certain period of time that the total amount paid for the lifetime of the loan will be higher. In addition, it may seem to save money with the combination of construction and end mortgages at the beginning, but if interest rates are shifted during the construction period, the final loan rate may not be as attractive as it was in the past. For this reason, the builders sometimes rather committed themselves only to the building loan and reworked the problem of the final mortgage loan with the creditor when the construction is almost completed, and at the same time it takes time to compare these rates of the snabis of other creditors.