Getting a Loan on a Partially Finished House: Your Financing Options

GCC Home Loans are experts in loans for incomplete houses, having provided hundreds of millions of dollars in construction loans to individuals, developers and owner builders across Australia.

If you need a loan to complete your project or renovation, contact our experts at GCC Home Loans to evaluate your options.

Purchasing a home that is not yet complete can be an attractive option for homebuyers looking to get more house for their money. While you can’t get a traditional mortgage to finance the purchase of an unfinished home there are some specialty loan programs that make it possible to buy and finish building a partially completed house.

Why You Can’t Get a Standard Mortgage

When you apply for a conventional home loan, the lender wants to ensure the property will retain its value if you default and they have to foreclose and sell it to recoup their losses With an incomplete house, there is too much uncertainty around the final value, so traditional lenders will not provide financing until construction is 100% finished

The reason comes down to how the foreclosure process works. If you stop making payments, it can take many months or even years for the lender to sell the home, during which time property taxes continue accruing. The lender has to pay off the back taxes before they can sell. With a half-built home, construction costs also add to this tax bill, making it riskier for lenders.

Specialty Construction Loans

Although you can’t get a conventional mortgage, there are some specialty construction loans designed for unfinished homes:

Construction-to-Permanent Loans

Also known as construction-perm loans, these combine a short-term construction loan that converts to a long-term permanent mortgage. Here’s how they work:

  • You get a line of credit to fund construction costs as you build the home.

  • Once construction reaches completion, the loan converts to a fixed-rate permanent mortgage amortized over 15 or 30 years.

  • Most lenders require you to use a licensed general contractor.

  • The loan amount is based on the land value plus construction costs.

These loans carry higher interest rates and fees during the construction phase, but convert to a traditional mortgage upon completion.

FHA 203(k) Rehab Loans

These loans insured by the Federal Housing Administration (FHA) allow you to buy and rehabilitate a home in poor condition or complete construction on a partially built home. Key features:

  • Can finance purchase plus rehab costs in a single loan.

  • Rehab costs can be up to 35% of home’s projected value after fixes (more for condos).

  • Converts to a permanent fixed-rate loan once rehab is complete.

  • Lower down payments as low as 3.5%.

  • May be used for primary residences and investment properties.

203(k) loans offer more flexible underwriting than conventional loans, making them useful for unfinished homes.

Home Equity Loans

If you purchase an unfinished home with cash, you may be able to get a home equity loan or line of credit to finance completion of the construction.

  • Interest rates are usually higher than mortgages.

  • Loan amount is based on available equity in the home.

  • Can be easier to qualify for than a construction loan.

  • Useful if you’ve already started on construction.

Home equity loans provide an alternative source of financing to complete repairs or renovations on a home.

Buying an Unfinished Home

While unfinished homes allow you to buy more house for less money, they aren’t without risks. Here are some key considerations when purchasing an incomplete property:

  • Inspections – Hire an inspector to check for rot, mold, burst pipes, and other damage. Catching issues early is cheaper than fixing them later.

  • Discounts – Negotiate a lower price to account for needed repairs and delayed move-in.

  • Construction Timelines – Get an estimate of how long it will take to finish the home. The longer the timeline, the greater your carrying costs.

  • Contractor Bids – Get multiple bids from licensed contractors to determine accurate construction costs.

With the right loan program and preparation, buying an unfinished home can help you afford your dream home. Just be sure to research your options carefully before moving forward. The specialty financing required and risks involved make it imperative to do your homework before purchasing.

Loans for Partially Complete Homes

Loans for incomplete houses – how we help:

  • We can lend up to 70% of the “on completion” valuation
  • We can lend up to 100% of costs to complete
  • 1st and 2nd mortgage options available
  • We lend to partly constructed properties
  • We also lend to owner builders
  • Servicing most metropolitan locations Australia wide

GCC Home Loans are experts in loans for incomplete houses, having provided hundreds of millions of dollars in construction loans to individuals, developers and owner builders across Australia.

We provide partially completed home loans for:

  • Residential houses
  • Duplexes
  • Townhouses
  • Apartment buildings
  • Commercial & Industrial

If you need a loan to complete your project or renovation, contact our experts at GCC Home Loans to evaluate your options.

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getting a loan on a partially finished house

getting a loan on a partially finished house

getting a loan on a partially finished house

getting a loan on a partially finished house

getting a loan on a partially finished house

getting a loan on a partially finished house

Use A Construction Loan To Build A House?

FAQ

Can you get a mortgage on a house that is not finished?

It’s possible to secure a mortgage for an unfinished house, but lenders may have stricter requirements and disbursement processes.

Will a bank finance an unfinished house?

The value of the property is diminished and they are at a greater risk during a resale should you default on the mortgage. Without a substantial down payment, most first time home buyers will be unable to obtain financing for both the sale price and the building costs of an unfinished home.

What happens if you run out of money while building a house?

The most obvious solution is to look for additional funding options. For a reliable property owner with good credit, it may be as simple as applying for additional financing. In some cases, like a lost grant, it may be much more difficult. The right option depends heavily on the type of project and its scope.

What will fail a conventional loan appraisal?

Conventional Loan Appraisal Checklist Wood-boring insects (termites), dampness, and abnormal settlement can affect the marketability off the property. Additions that do not have a required permit require the appraiser to comment on the work and assess the impact of the market value.

How do you refinance a home construction loan?

You receive a line of credit for the home construction and then you refinance that debt into a regular mortgage when you have finished the work on your home. You have to hire a certified or licensed contractor to build the home and the loan amount depends on the value of the land plus the construction costs.

Can you get a loan for a home that is not finished?

For borrowers in atypical homeowner situations, the list becomes short quickly. If you have a home that is under construction, or you wish to purchase a home that is not yet finished, your options are fewer, but it is still possible to find the financing you need. The most common type of loan for unfinished homes is a construction loan.

Can you get a construction loan on a partially finished home?

While you can obtain a construction loan to build a new house entirely, you can also get an equity loan on a partially finished home. Both types of loans will likely require you to pay only interest on the loan while the home is under construction, and then mandate a balloon payment of the entire amount financed once construction is complete.

Should you buy a partially built home?

If your dream home exceeds your budget, you can still get yourself a nice pad if you buy a partially built home. Such homes often come onto the market when construction firms go bust. You can finance the purchase of the property and the rest of the construction work although you can’t use a conventional mortgage to buy an unfinished home.

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