Can You Buy Furniture With a Construction Loan?

A construction loan provides specialized financing for building a new home or undertaking a substantial renovation project. This loan differs from a traditional mortgage, as its primary purpose is to fund the development and construction phases of a property. Construction loans are short-term, designed to cover costs incurred during the building process. They are considered higher risk due to the absence of a completed home as collateral, leading to higher interest rates and requiring larger down payments compared to standard mortgages.

Eligible Construction Loan Expenses

Construction loans cover expenses related to the physical development and permanent integration of a property. Funds can be used for acquiring land, architectural designs, engineering fees, and building permits. The loan also covers “hard costs,” including materials like lumber, concrete, and roofing, as well as labor for contractors and subcontractors. Permanent fixtures, such as built-in cabinetry, flooring, plumbing, electrical systems, and major built-in appliances like ovens and dishwashers, are also included. These expenses are disbursed in stages, or “draws,” as construction progresses and milestones are met.

Ineligible Construction Loan Expenses

Construction loans do not cover items considered personal property or those not permanently affixed to the home. This includes furniture like sofas, tables, and beds. Decorative lighting, window treatments, and stand-alone appliances such as washing machines, dryers, or movable refrigerators are also excluded. These loans are secured by the property itself, and lenders finance assets that contribute to the property’s appraised value, not items that can be easily removed. Using loan funds for such items would deviate from the loan’s purpose of financing the physical structure.

Alternative Furniture Financing

Since construction loans do not cover furniture, several other financing avenues are available for furnishing a new home. Personal loans offer a lump sum that can be used for various purposes, including furniture, with fixed interest rates and repayment terms. Credit cards provide immediate purchasing power and potential rewards, though they require careful management to avoid high interest charges. Many furniture retailers also offer their own financing plans, sometimes with promotional periods of zero percent interest. For homeowners with sufficient equity, a home equity loan or line of credit (HELOC) could be considered, leveraging the home’s value to secure funds for furnishings.