One year ago, a state housing agency report projected that Maine will need at least 84,000 new homes by 2030 just to meet the current demand. With the housing market becoming tighter and tighter, there are simply not enough actual houses available to purchase for people who want to call Maine home.

This situation has made building a new home an increasingly popular option among people who want to live here. It follows that it has also made home construction loans an increasingly popular financing option.

Is a building a home right for you?

Building your home is an extended, finely detailed process that will require you to make many plans yet be ready to make changes and new decisions along the way. From size to materials to infrastructure to finishing touches, the many decisions you’ll need to make can feel exhilarating, or frustrating, or a combination of both. You might be buying land as part of the project and uncovering more unknown obstacles. It is truly a ground up process, from the outside in.

Almost everyone in the process wonders at some point if it’s worth it, but the result of a customized, brand-new home or second home—and perhaps trading in the aggravation of the buyer’s market—can make all of the work worth it.

The success of this process begins with obtaining the right construction loan and this step is much simpler with an experienced home construction lender. Katahdin Trust can be a resource for you, as the application process will be a tool to help you organize. Yes, you will provide lots of detailed information about your finances, but you will also have to include complete plans for the project and a list of contractors and subcontractors.

There will be a lot to do, but Katahdin Trust construction loan customers only need to fill out one application with one closing day. Once you’ve provided all the necessary information your approval is typically takes less than a week.

What is a construction loan?

A construction loan is a short-term loan that funds the building of a new home, camp or other real estate project such as an investment property, manufactured home or condominium. It can even be used for certain types of energy upgrades. During the construction phase, the borrower can typically expect to make monthly interest payments. Then, upon construction completion, the loan converts to a fixed-rate loan with a variety of terms available.

To determine your best financing options, it’s important to work with an experienced local lender such as Katahdin Trust Company, which has locations all over the state, including a southern location in Scarborough. They can help you explore your options and guide you through what can be a complex process. But even before you consider the various types of loans, you can use an online calculator to help determine what you can afford.

Using an online calculator can help you take a step back and see how financially feasible your project is. It will ask you for the highest monthly payment you can afford and break down what is included in that payment such as local property tax, insurance costs, down payment, interest rate and other details. From there, your lender can help you consider different options for financing a construction project.

What else can I do besides build new?

Maybe remaining in and improving your current home is an option you must consider. If that’s the case, combining a construction project budget into your home loan or getting a HELOC (Home Equity Line of Credit) may be right for you. This is a loan product that many homeowners use. A HELOC allows homeowners to tap into the equity they have in their homes to borrow funds and make home improvements or repairs, such as replacing a roof, putting in a pool or adding on a deck. If the costs of your planned renovations exceed the existing equity in your home, you could consider refinancing your existing home mortgage and adding funds for construction based on the estimated completed value.

If your original mortgage is with Katahdin Trust, you can expect to borrow up to 90% of the existing home’s value with a HELOC, and benefit from low closing costs and fees, as well as flexible payment options. New customers at Katahdin Trust will also find favorable terms.

The challenges of Maine’s current housing market are many, from having insufficient inventory to high list prices, reflecting how home values have doubled over the past several years in some areas around the state. This is causing potential homebuyers to weigh all their options, which will include building a new home. The more you know about construction loans, the better you will be able to avoid the potential pitfalls and delays that can sometimes accompany them. Your lender should be able to give you solid information, which is the best foundation for a new Maine home.

Disclosure: All loans are subject to credit approval. Property insurance is required. Equal Housing Lender, Member FDIC.