After fully convincing myself that I was going to use Robar General Funding Corp. for the construction loan, I have been convinced otherwise by my General Contractor.  Being someone that has worked several banks through the years, he told me that my best bet was to look right in my own backyard, at Northwest Savings Bank.  His opinion was that they offered the fewest fees, the most flexibility with rates through construction, and he had worked with them a ton.

All of my personal banking is through Northwest, as was my previous mortgage, so this was music to my ears!  Because of the banking crisis, I decided that I should check a few others as well, and I did find that Northwest was the best deal.  They were also one of the only banks that allowed me to lock in a rate for my final mortgage up front.  With rates a historic low, I didn’t want to gamble with what my rate would be at the end of construction, something Robar and many other banks require.

Flexible Rate

One of the best features of the loan through Northwest is that they will allow you to pay a fee during construction, and after, as long as they have not sold your loan, to get a rate very close to the current rate.  So, if during construction the rates drop below your locked in rate, you can pay a one-time fee and get the 1/8th above the current, lower rate.

No Bi-Weekly Payments

With our first 20 year mortgage, we setup automatic bi-weekly payments, which drastically reduces the amount of interest you pay on your loan, and cuts a 20 year mortgage down to 17 years.  The way it works is you take your monthly loan payment, and pay half of it every 2 weeks instead of all of it once a month.  By making half of the payment more regularly, you reduce the principle balance faster, thus reducing interest on the principle.

This was something that I really wanted to do again with our new mortgage.  Unfortunately, Northwest has now implemented a bi-weekly payment processing fee that neutralizes the effects of the bi-weekly payments, thus making it completely useless.  To get around this, one can make one extra mortgage payment a year and achieve the same effects.  I think I’ll be doing that.

Shop Around!

If you’re looking for a construction loan or mortgage, take a day and visit all of your local banks.  Make a spreadsheet of:

  • Their best rate for 15, 20, 30 year mortgages
  • Their closing costs
  • Their acceptance of bi-weekly payments
  • Any prepayment penalties
  • Down payment requirements
  • Preapproval amount

Then, you can take an unbiased look at the data and make a good decision.  Having shopped around, you will certainly feel better about your decision, even if you end up going with the original bank you wanted to work with.