Understanding Alternative Financing to Mortgage Workflow

[Sean Ryan]

Hey All -- I believe I have an understanding of the financial workflow here, but figured this group would have lots of personal experience and or advice. Thanks for your help--

Background -- About to start construction on a single home residential property as an owner builder (and yes I know how many in this group already feel about that). The land is owned and paid off, budgets are dialed, bids are in, etc. We'll be paying for the first half of the build via a HELOC on our primary residence. When they money is gone, we have a hard money lender that works exclusively with owner builders lined up to fund the remainder of the project.

All this seems straightforward, with the understanding that this money will incur higher interest rates and will need to be paid off as soon as possible. Am I correct in my understanding that after the house is built and a CO is issued, we can work with a traditional bank/lender to get the new home appraised and take out a traditional mortgage on the home for XX amount (the amount owed to HELOC and hard money lender)?

If it is that simple, do we receive cash from the the mortgage holder/bank and then just pay off the first two parties via cash? How exactly does that work? There are no penalty fees for paying off the loans early, FYI.

Anything in this workflow that I'm missing? Am I completely off here? Thanks--