Question 1

What interest rate should I expect on an Atherton construction loan?

Accepted Answer

Rates typically run 1-2% above conventional mortgage rates as of February 2026. Expect 7.5-9% depending on your credit profile and project risk. Rates vary by borrower profile and market conditions.

Question 2

Can I use a construction loan for a tear-down and rebuild?

Accepted Answer

Yes, most lenders structure these as lot purchase plus construction. You need enough equity in the existing property or cash to cover the 20-30% down requirement on total project cost.

Question 3

How do construction loan draws work during the building phase?

Accepted Answer

Lenders release funds in stages tied to completion milestones. An inspector verifies work before each draw. Expect 4-6 inspections from foundation to certificate of occupancy.

Question 4

What happens if construction costs exceed my loan amount?

Accepted Answer

You pay overages out of pocket before the lender releases the next draw. This is why we recommend budgeting 15-20% above estimates and maintaining strong reserves.

Question 5

Do construction loans require PMI in Atherton?

Accepted Answer

No, these are typically jumbo loans with 20%+ down. PMI doesn't apply. Lenders may require builder's risk insurance throughout construction.

Construction Loans in Atherton: Finance Your Ground-Up Build or Major Renovation