When planning for the financing behind a new home building project, a buyer has a variety of options available to them to help mitigate the various financial risks of the project itself. Specifically, because of the way in which a new home building project faces so many different possible failure outcomes as a result of poor planning, or setbacks to the project that will require additional funding, a buyer stands to benefit a great deal by taking the time to break the project down into a number of financing stages, which will limit their exposure to debts into discrete units of obligation.
The easiest way for a consumer to break down their new home construction project into discrete borrowing units is to look at the tangible aspects of property that go into the project itself, and determine how it is that they contribute to the project in terms of their lendability as collateral. For starters, we can look at the raw land underneath the property as a tangible unit of collateral that can be borrowed against independently.
This means that a buyer can finance the purchase of the raw land through debt before making an obligation to start the project itself. From there, the buyer is able to take as much time as they’d like before they start the financing agreement for the actual build itself, and can therefore make sure that they are in a position to move on the project without fear of losing the location itself to another buyer. Read More →