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I am looking to purchase a lot in cash and then have a custom home built. Our builder and the home design is already decided. We are doing a construction to perm loan (haven't decided single or two close). My question is, how can I calculate the cost difference between the construction loan vs a traditional? I'm assuming its mostly just a matter of adding up the total cost of interest payments during the construction that the builder would typically be responsible for during a traditional build. Are there other factors to consider? We have to renegotiate the total build cost with the builder now that we are doing a construction loan.
Not entirely clear what you are asking. I assume the differences and merits of either an owner construction loan, a builder construction loan or an all in one owner loan that converts to your mortgage when you move in.
Construction vs. all in one. All in one you need a down payment which means cash upfront. Since you don't have that cash elsewhere making income and can't live in the house your effective interest rate is higher. You save on fees though.
Builder vs owner construction loan. Really depends on your relative rates and how your builder charges you. A normal construction loan you pay interest only on what's been paid out to your builder in tranches at different end points of the build. If that's how your builder totals it you just need to compare rates. But your builder could just charge interest from the day each expense is incurred which would make it higher at an equal interest rate.
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