Author: Herbert Whitney

The price of residential property is increasing day by day, meaning that many people feel priced out of the market altogether. Therefore, it is no surprise that the amount of people looking for a construction loan is much more than before. You have to look for alternative sources to buying a place or moving, and the best possible solution in such a scenario is construction finance. In this article, we look at how construction finance work and what are its basics.

What is construction finance?

Construction finance is a type of loan that is suitable for people who want to construct their own building, home or office, instead of buying a property that has been established. It also has a different loan structure than the other types of home loans as you are actually starting everything from scratch and the needs are different from what you have for a developed location. Therefore, a construction loan is a unique option for lenders or builders to help them do the job. The amount available for usage will depend on the evaluation of the location, the total costs analysis that shows the money needed for the construction work. 

How does construction finance work?

You do not get a lump sum payment for these loans like other options, instead, the lenders have fixed payments which can either be in installments or on the completion of a stage during the construction. This is one of the main requirements of the loan providers so that they ensure the money is being spent on the actual task. Generally, there are five primary stages of payments that start from the pouring of the foundations, framing, brickwork completion, locking up and the final construction completion. 

Most of the lenders will appoint a person who will take care of all the construction work along with you and will also help in making sure you spend the money in the right places. Therefore, the construction loan payment is progressively drawn-down. That is, you increase or decrease the borrowing as needed to pay for the construction process. The interest is charged only on the rate that was decided and the first payment you have drawn. For example, if the total loan was of £300,000 and you have withdrawn only £50,000 initially, then the interest will be charged on the £50,000.

What is the payment breakdown?

As stated earlier, the payments are made in five different stages once the loan has been approved.

Slab pouring is the first stage and the amount paid here is to help with laying the foundation of the building and covers the levelling the ground, the plumbing systems and the waterproofing procedures. 

The frame is the second stage, and the money here helps with the building the framework of the property, some of the main things covered with this cash is brickwork, trusses, windows and roofing.

Lockup is the third stage of the payment in which the money helps with the covering of the property, usually the outer walls that will come with windows and doors. The next stage of payments helps with the internal fittings and equipment of your property and covers a wide range of things such as the plasterboards, cupboards, benches, plumbing, electricity, sewerage and other things. The last stage is the completion where the amount for the conclusion of items such as building equipment, finishing touches, wiring and cleaning is covered to ensure that everything is done correctly.

Advantage of construction finance

One of the main benefits of construction finance is the security it provides with the construction work. The lenders release money periodically, which means that the contractor will not be paid for something they haven’t even done or isn’t up to the standards. Having a lump sum payment in your hands can also lead to the cash being spent on something other than the actual task at hand.

The interest rates are much less than the other options. You will have a fixed amount that you can withdraw during the duration of the loan, but the interest rate will only be charged on the money that you are actually using and not the total amount. It is a significant advantage for people with less resources than others as you save money during construction.

Another advantage is that the loan is interest-only during the construction period which means that you only have to pay the interest during that time and the total balance remains unchanged. It helps with the cash flow during the work and is useful if you have to rent somewhere else during the time of installation.

Disadvantages of construction loans

There is a lot of paperwork and requirements to be fulfilled before you actually get your hands on some cash. The loan providers require several documents and building plans approved by the city council before they can make any decision. They might also want to see your credit history, and he fixed price building contract to approve the loan, so you have to spend a lot of time and effort before the final result.

The construction loans have higher values on the deposits especially if you are doing all the work yourself along with owning the building so you will have to pay a large deposit to make sure the loan is yours. Another disadvantage here is that the payments can be delayed because the lender wants to be satisfied with the progress before releasing more money.

Lastly, the interest rate on the overall payment is still higher than the usual home loans during the construction but does go back to the standard charges once the building is completed.

All in all, there are several different options out there if you are looking for a construction loan, getting an idea about how does the construction finance work is just the first step, you have to evaluate your situation, look at all the pros and cons and then reach a final decision that best suits your requirements.

There is always the right fit formula for financial success. Although everyone differs when it comes to his definition of financial success, financial planning works for everyone. It is best to manage your finances if you want to become extraordinarily wealthy or at least financially stable. Your family and loved ones will really appreciate it if you know these proven steps of effective financial planning.

Begin and End With Cashflow

If you make efforts to increase your cashflow now, you’ll realize it’s the same thing you’d want for yourself in the future. Approach a company that can help you manage your finances and help give you advice on how to reduce expenses and improve cashflow. There are many more ways to generate cash, not only through your job. Get an expert Financial Planner who can help you become a better manager of your daily finances.

Have an Emergency Fund

Having an emergency fund will shield you from many unnecessary dips into your investments. In case you have to face actual emergencies or just unavoidable expenses, then you have a fallback. Begin with $1000 or even $2000 if you can. The most important thing is that your emergency fund is at least equivalent to six months of expenses in case something unexpected happens to your income source.

Grow Your Wealth Through Investments

One of the necessary steps to financial planning is to learn ways of investing your cash. Don’t immediately venture into something you don’t completely understand, even a simple franchise business. You need someone who knows the ins and outs of investing money wisely. Get into a Wealth Management Program that holistically approaches your financial life. If you don’t do this step, then marriage, career, and children might end up as obstacles to your finances. Here are some popular investment options:

• Buy and Hold investments like real property
• Negative Gearing that lowers your tax bracket
• Property Trusts that include different kinds of assets in a professionally managed portfolio

Manage Debt and Loans

Managing debt is not as easy as paying off loans regularly. It is still the most significant and most crucial step, though. Pay your bills on time every month and pay your credit cards on time. You should pay at least the minimum charges. If you think you need one, then seek credit counseling in order to get back on track. Also, make sure you make a monthly budget plan in order not to make the same mistakes again.

Some Final Words

Financial planning is a serious task. This is because money problems are not a joke. Financial issues can derail your success, cause enormous stress, and even lead to divorce or substance abuse. That’s why you need to plan your finances as early as possible. Always seek expert professional advice when dealing with your home loans and investments financial planning services. In the end, only you can help yourself and can make yourself financially stable. No one else can and will do it for you.

Earlier this year when the Central Government announced the implementation of e-way bills for movement of goods, it met with a mixed feeling of joy and confusion. Joy, because goods carrier can generate eway bill electronically using software. Confusion – as most transportation companies believed that e-way bills in the country were implemented without discussions and given enough time to fulfill the necessary documentation processes.

Here are some important things you should know about eWay Bill and how it is set to transform the logistics and transportation businesses in India.

State movement of Goods: eWay Bill is a Compulsory

Due to illegal transportation of goods, especially contentious smuggling of alcohol, sugar, grains and meat, eWay Bill was a compulsory mandate announced across India. With eWay Bill, goods carriers can freely transport their cargo from one state to another and intra state. This has greatly streamlined the movement of logistics and reduced possibility of bribery and in advert delays.

eWay Bill could be checked at any time of the transporting of goods, including the stage when it has already been delivered to the destination.

Registered Persons Can Only Make a eWay Bill

eWay Bill can be generated by registered companies or individuals,

Who is a registered person? Let’s try to define this.

A registered person could be a consignee (buyer) or the consignor (seller of the goods) causing the movement of the goods or consignment using a motorized vehicle, hired or private, or by ship, train or railways. The E-way bill software would allow the registered person to generate an eway bill electronically using a common portal online.

If the consignor or consignee both are not registered, then the transporter would be the party considered as a registered person who has to generate the eway bill using the software.

In short, the consignor, the consigness and the transporter can all be registered person or parties in the completion of eway bill generation as registered parties.

The eWay Bill is applicable for cargos and goods transported via road, rail, air, or by ships.

What is Supply and what is Return?

When do you need a eWay Bill?

The eway bill generation process has two steps:

Part A

This has to be furnished by the consignor, a person who is causing movement of goods of consignment evaluated at Rs. 50,000/- or more.

Part B

Transport details that are furnished by the registered transporter carrying the goods in their vehicle.

The eWay Bill can be generated between persons and transportation companies who are ferrying goods via motor vehicles only.

Empty Cargo containers: No eWay Bill Needed

If there is no goods or cargo in the container ferried by the motor vehicle, goods companies need not generate an eWay Bill. This means that if the motor vehicle is returning from its supply destination back to its source without any goods, no eWay Bill is demanded.

The consignor or consignee himself generates the eway bill if the transportation is being done in own/hired motor vehicle or by railways, by air or by ship. Using an online portal reflects the status of Eway bill receipt if the consignee or consignor has formally accepted or declined the supply of goods as mentioned in the bill.

If speaking of stock marketing, investing, buying and so on; there are different types of things that have to be kept in mind. Most of the individuals take assistance of professional brokers when they step into stock marketing. These brokers are the middlemen when talking about purchasing and vending stocks.  These professionals handle your orders to sell or purchase a particular stock.

There are mainly two kinds of brokers Discount brokers and fulltime brokers. The former brokers fetch you all the information and give you exact guidance that too without any additional charges.  However, speaking of the latter one, they facilitate things for investors and might charge investors for even the things that investors weren’t needed. Anyhow, it is the personal choice of investors whether they want to go for Discount Brokers India or fulltime brokers.

These are the brokers that cater a platform for transaction and the services that are essential to complete a transaction. The alteration between a discount one and a full-service broker is reproduced by the transaction cost on low-cost stocks or on the substitutes trading.  There are various brokerages who charge a least amount for stocks below a specific price. Their aim is to guard their brokerage in absolute terms as low-priced stock could give them small brokerage if they get calculated in the terms of percentage. Similarly, in the realm of options trading (that are usually low-priced, mainly out of cash options) different brokerages have a flat quantity per contract. This is a technique of calculating brokerage that has a massive impact on the profitability of client.

Once more benefit of a discount fellow agent is that they are impartial. Yes, it is because they cater no advice. They are not going to make you vend a good stock or at the same time, make you buy one. They are not going to trouble you with their research calls and remind you about that of all the trading calls that clicked while conveniently brushing recommendations under the carpet that did not perform.

It is important for you to know that Indian financial markets have undergone a drastic change for the good over past decade. Electronic trading has not just got transparency in a business that was infamous for opacity but it has also brought down prices. Web trading has raised the transparency and payment parameters to a completely new level. Internet trading has also fetch in a set of brokers who offer cheap rates for transactions. These are the fellows who are known as discount agents or brokers in industry parlance.

Charges: what are they for?

A broker charges brokerage for offering a platform to transact. The conventional brokers charge higher brokerage simply as they claim to offer value addition by catering research calls. Though a conventional broker could sound kind by claiming that his  well-researched calls are produced by a huge team of highly educated and more importantly highly paid analysts with sole goal of helping client increase wealth, the truth is quite different. A broker makes money only in case any client transacts. And the more a client manages, the better brokerage goes to the fund of the brokers. Brokers generally have differing rates of brokerage that rely on the client and quantum of trading.

Conclusion

So, after reading it all you might have made up your mind regarding discount or fulltime brokers.