Home Construction & Renovation FAQs
Q: How does a construction loan work?
A: With a construction loan, the amount borrowed is based on the cost of construction relative to the estimated value of the home once completed. A final construction contract and home plans and specifications need to be completed before the appraisal can be ordered. During the construction term, which will vary from 4 months to 12 months depending on the program, the loan is set up with interest-only payments as funds are advanced. Once the home is complete, the loan payments become fully-amortizing based on the loan program terms. For an example of how this process typically works, view our Construction Timeline.
Q: How are my payments calculated during construction?
A: With a construction loan, the payment during the construction term is interest-only based on the loan’s outstanding principal balance. Over the term of the construction, your payments gradually increase as funds are issued to the builder and your balance on the loan increases.
Q: What is a draw schedule?
A: A draw schedule outlines the amount of funds to be advanced to the builder as each stage of construction is completed. This document is agreed to and signed before closing. ENB offers either a Standard “Grouped” Draw Schedule or a Percentage of Completion Draw Schedule. We’ll work with you and your builder to customize a schedule that meets the needs of the project.
Q: How does the builder get the funds?
A: Either you or the builder may request funds as construction is completed. Once the request is made, an inspector is sent to the property to verify the work is completed. Upon receipt of the inspection report, ENB will release the funds. The standard method is a check made payable to both you and the builder. However, you may elect a Direct Disbursement to Builder option. In this scenario, you permit ENB to release the funds directly to the builder, either via check or ACH, speeding up the funding process for the project.
Q: How do I request a draw?
A: The simplest and fastest way to request a draw is to use our Online Draw Request Form. If that is not possible, you or the builder may contact your ENB Mortgage Expert or our Real Estate Inspection Department at (877) 773-6605.
Q: How long does it take to receive a draw once requested?
A: It generally takes 3 to 4 days. This assumes you have requested funds using the Direct Disbursement to Builder option and the builder has provided ENB with their wire information. Inspection turnaround and speed of mail delivery can impact this timeframe. Checks made payable to you and the builder typically are mailed within 7 days after the request.
Q: What do I need to do to when it is time to start making principal and interest payments?
A: For all construction loans, we need a copy of the Certificate of Occupancy issued by the township/municipality. Some loans also require updated income documentation, a new credit report and loan modification agreement, which states the current loan balance, interest rate, principal and interest payment and maturity date.
Q: Does ENB have an approved builder list?
A: No. It’s important for you to do your own due diligence and background work on contractors to make sure you’re comfortable with them. ENB doesn’t approve or endorse any builders, contractors, or home improvement companies.
Q: What happens if I have a Construction-Only loan, but my current home isn’t sold at the end of the construction term?
A: You’ll have to refinance the construction loan or otherwise pay the loan in full at the time of maturity.