Funding Mission
It’s no secret that a log cabin is a substantial financial investment, but it’s also one of the smartest money moves you can make.
Log homes appreciate in value over time and remaining resilient through the fluctuations of the traditional real estate market.
If you are ready to move forward with the design and construction of your Freeloghome and plan to obtain a loan, we’re here to guide you through the unique rules and requirements of the log home financing process. Keep reading for expert advice on securing the home of your dreams.
Choose the Right Lender
Having the right team in your corner is essential in every part of the log home building process, including financing. Traditional loan experts are often unfamiliar with the nuances of log home construction, so we recommend selecting a lender with specific experience in log home loans. Talk with local log homeowners and your builder for recommendations, or ask for our list of institutions that understand the aspects of log home financing.
Get Your Paperwork in Order
Lenders experienced in log home construction can help streamline the necessary paperwork, but you’ll still need to prepare a comprehensive portfolio to secure a loan. In addition to the standard documents, like pay stubs, bank statements, and T-4s (Canada) or W2s (USA) required for a traditional mortgage, you’ll need to provide documentation relating to your land purchase, a deed & survey, along with an in-progress floor plan, local building permits. An estimation costs for your FLH log home package and expected construction expenses from your builder.
Understand the Two-Loan Process
Unlike a traditional home mortgage that typically involves just one loan, you’ll need to obtain two loans when building your FLH log home. The first loan, a short-term construction loan, will allow you to pay for the building materials and labor construction costs during the build of the home. The second loan is similar to a traditional permanent mortgage, covering the full purchase price of the home itself.
Keep in mind that there are two main types of loan options for the short-term construction loan. For either type, you will pay interest only during the life of the loan. A one-time close loan joins your short-term loan with your long-term mortgage, automatically rolling the former into the latter at the end of the term. This joint approach may be the easiest option, as you will only apply for the loan and pay closing costs once, but keep in mind that rates may not be as competitive as the second option. The two-time close loan will require you to have two fully separate loans. To begin construction, you will obtain the short-term construction loan. Once your home is built, you will need to reapply for a long-term mortgage and pay closing costs again. This option may allow you to take advantage of better terms and rates with the flexibility of shopping around, but it can also pose a risk if your personal financial situation changes during the construction process or interest rates increase.
Establish Payment Term Timelines
There are a number of moving parts when it comes to constructing your log home. Knowing what to expect, especially in the area of finances can help you feel in control of the process.
In order to secure your FLH log package, you will first need to put down a deposit. This amount will typically be covered by your short-term construction loan and released by your lender. These released funds are called “draws,” and you will typically have a certain number allowable in the terms of your loan without penalty. The next payout or “draw” will be when your log home package is delivered. Depending on terms agreed upon with your builder, you may need to supply a payment amount up front, with the remainder paid once your home is complete.
Be sure to confirm all payment terms in writing with both FLH Log Homes and your local builder, and verify that your lender will be able to meet the scheduled payout requirements. Again, keep in mind that you will only make interest-only payments during these staged disbursements of your short-term loan, and the full principal amount will be converted to your traditional permanent loan when your home is complete.
