New Jersey is a popular state for new construction projects, with rising demand for new homes and commercial buildings. As a result construction lending has become big business for banks and mortgage lenders in the state. When taking out a construction loan interest rates are a major factor that borrowers must consider carefully. This article will provide an overview of current construction loan rates in New Jersey and tips for finding the best rate.
Overview of Construction Loan Rates in New Jersey
Construction loan rates in New Jersey are largely driven by broader economic factors like the prime rate and benchmark rates set by Freddie Mac and Fannie Mae. Here are the latest average rates according to Bankrate’s survey of major lenders:
- For a 1-year adjustable rate construction loan, rates range from 5.5% to 8% for loans under $417,000.
- For a 5/1 adjustable rate construction loan, rates range from 6% to 8.5%.
- 10/1 and 15/1 adjustable rate loans also average around 6% to 8.5%.
- Fixed rate construction loans are less common but average 6.5% to 9% for terms of 5, 10 or 15 years.
In general, construction loan rates tend to be higher than rates for traditional mortgages This is because construction loans are riskier for lenders since the asset (the home) is not yet completed As a result, pricing tends to have a premium over standard home loans.
Tips for Finding the Lowest Construction Loan Rates
While construction loan rates are largely based on macroeconomic factors, borrowers still have some ability to shop around and secure a competitive rate. Here are some tips:
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Check rates from both national and local/regional lenders. While big banks can leverage economies of scale, smaller lenders are often hungrier for deals and may offer better pricing.
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Ask about discounts for existing customers. If you have other accounts with a lender, they may offer a relationship rate discount of 0.25% to 0.5%.
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Look for lenders that offer a rate lock option. This allows you to lock in a rate upfront rather than face fluctuations while building. There is often a 0.5% to 1% fee for a lock.
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Consider alternative lending sources. Credit unions, non-bank specialty lenders, and peer-to-peer lending platforms may offer more competitive pricing than traditional banks.
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Shop for rates as soon as possible. Give yourself more time to shop allows you to compare multiple options rather than having to accept a higher rate due to time constraints.
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Review fees carefully. The interest rate is not the only cost—look out for origination fees, application fees, and rate lock fees.
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Ask about discounts for green building. Some lenders offer incentives for energy efficient and sustainable construction.
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Have a large down payment. Proposing a down payment of 25% or more signals lower risk and may result in a better rate.
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Get your finances in order. Having a strong credit score, limited existing debt, and solid employment history will help you qualify for better pricing.
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Use a broker. An experienced construction loan broker has relationships with many lenders and can help you find your best options.
Current Construction Loan Rates at Top New Jersey Lenders
To give you a sense of current market rates, here are the construction loan rates being offered by several top lenders in New Jersey:
Amboy Bank
- One Time Close Construction Loan
- 1 year adjustable rate: 6.75%
- 5/1 adjustable rate: 7.25%
- 10/1 adjustable rate: 7.75%
TD Bank
- 12-month adjustable rate: Prime + 1%, currently 7.5%
- 5/1 adjustable rate: Prime + 1.25%, currently 7.75%
- 10/1 adjustable rate: Prime + 1.5%, currently 8%
- 20% down payment required
Fulton Mortgage Company
- 1 year adjustable rate: 8%
- 5/1 adjustable rate: 8.5%
- 10% down payment required
LoanDepot
- 12-month adjustable: 5.99%
- 5/1 adjustable rate: 6.75%
- 10/1 adjustable rate: 7.25%
- 20% down payment required
Guaranteed Rate
- 1 year adjustable rate: 6.5%
- 5/1 adjustable rate: 7%
- 10/1 adjustable rate: 7.5%
As you can see, construction loan rates can vary significantly from lender to lender, so it pays to shop around. Pay close attention to fees, down payment requirements, and discounts. Securing pre-approval also allows you to lock in a rate upfront. With some research and shopping, you can find competitive construction loan rates in New Jersey.
Have questions? Amboy can help!
When considering how much you can afford with your home construction project, you might first want to figure out how much you are comfortably able to pay for your housing expenses. Many financial advisors put that number at around 30% of your income, but that could vary depending on your personal situation. You should also determine if you would qualify for a mortgage based on the expected value of the new home.
Amboy Bank offers a One Time Close Construction Loan that provides funds during construction and then converts to a permanent mortgage once the home is completed, all with just one set of closing costs. Learn more or start the process today.
With a construction loan, your lender typically approves you for a line of funds that you can use to pay for your building costs. A construction loan is effective only for a finite term, and sometimes can be rolled into a permanent mortgage.
Amboy Bank offers a One Time Close Construction Loan that provides funds during construction and then converts to a permanent mortgage once the home is completed, all with just one set of closing costs. Learn more or start the process today.
The advantages of building your own home can be numerous. In fact, many people consider this their chance to build their dream home! Depending on your budget and local zoning requirements, you can specify the building’s architecture, size, layout, energy efficiency, appliances, mechanical systems, and more according to your own personal tastes.
Amboy Bank offers a One Time Close Construction Loan that provides funds during construction and then converts to a permanent mortgage once the home is completed, all with just one set of closing costs. Learn more or start the process today.
We offer a number of mortgage types with a variety of terms. Whether you’re looking for a fixed, adjustable, biweekly, jumbo, or traditional mortgage, Amboy has you covered. Below are some of our most popular.
Use A Construction Loan To Build A House?
FAQ
Are construction loan rates higher than mortgage rates?
What is the lowest down payment for a construction loan?
Is it a good idea to get a construction loan?
How much interest paid on construction loan?
What is the difference between a construction loan and a mortgage?
A construction loan is generally a short-term loan designed only to cover the costs related to building (or renovating) a home. A regular mortgage loan, by contrast, is usually a long-term loan meant to fund the purchase of a home.
How much does a construction loan cost in New Jersey?
New Jersey has 38 construction hard money lenders operating within the state. The mean loan issued is around $309,998. Rates for loans average about 11.4%. The median term for notes is 22 months. The average origination fee charged on the loans is 3.2%. Lenders in New Jersey average a 72% LTV on their loans.
Where can I get a construction loan in New Jersey?
They are typically offered by banks and other financial institutions. In New Jersey, construction loans are available for a variety of property types, including single-family homes, multi-unit residential buildings, commercial buildings, and more.
Should you take out a construction loan in New Jersey?
Taking out a construction loan in New Jersey offers a myriad of benefits and very little downside. A construction loan allows you to make interest-only payments during the construction phase of the process, resulting in an affordable monthly payment.