Dear CK: I have a plot of 50 by 100 at Utawala in Nairobi. I’m planning to build some rentals.
Please advice me on how to finance my project. Mercy Mwendwa, Nairobi.
Dear Mercy: Just as you can get a loan to buy a house, you can get construction financing to construct your home.
The following are the steps to follow:
1.) Search for and purchase your desired piece of land.
2.) Buy a ready-made house plan or have it custom-designed.
3.) Find a building contractor and ask him to prepare a contract specifying the price for construction.
4.) Discuss with your banker regarding a construction loan that could possibly roll over into a mortgage upon completion of the house.
5.) Inquire with mortgage providers – a number of them offer loan packages for construction of custom homes.
6.) Apply for the construction loan at your chosen financier.
7.) Include a bank statement, a construction budget, blueprints and any other information of this nature that the financier may request.
8.) Ask for a construction advance timetable that matches your obligations to the building contractor so that you do not suffer cash-flow problems during construction.
Note carefully:
1.) Most banks will finance the full construction budget, secured by the entire property (plot and house).
2.) Construction loans are almost always variable rate loans, with the interest rate floating in response to market conditions.
3.) You may be required to pay appraisal costs and even the bank’s lawyer fees. You should also be prepared to pay an inspection fee each time the bank makes an advance. – eHow Money
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