The documentation signed at the closing may be modified for the permanent financing to take effect, or, in some cases, the loan starts amortizing at an agreed upon rate when the house is complete. During construction, most banks charge interest only on the funds advanced. Therefore, monthly payments increase as the total money advanced increases. Once construction is complete, payments include principal and interest. Funds are released during construction according to a schedule of disbursements agreed upon prior to closing.
Lenders usually release funds within a week of a request, sometimes sooner.
Funds are typically advanced for work completed, not for unfinished work or supplies on site. This gives the borrower final control over the disbursements. Additional funds are disbursed according to a specified schedule of construction, and can be in as few as one or over five separate payments, or draws as they are referred to in construction financing. This is the total of the land disbursement and the first disbursement. Building your dream house has never been easier.