Construction Home Loans

Are you looking to build your new home rather than purchase an existing property? Are you planning a major renovation which will change the structure of your house? Then a construction loan is for you.

The process for getting approved for a construction home loan is very similar to that for a standard home loan. The main difference between a regular home loan and a construction home loan is that the lender will require you have a fixed price building contract and council approved plans.

#1 – The Benefits of a Construction Home Loan

Progress Payments – Unlike a regular home loan where the full loan amount is drawn-down at settlement, with a construction home loan the loan is drawn down in stages (progress payments) at the completion of each stage of the build, e.g. slab, frame, lockup, fit out and practical completion.

Interest Only – During the construction of your property you will only have to make Interest Only repayments on the loan. The banks recognise that most people will have an existing home loan or are renting while they build their new home. To alleviate any cash flow issues you will only be required to make interest only payments until the home is complete and then the construction loan will convert into a normal Principle and Interest home loan.

Minimise Interest Paid – You only pay interest on the funds drawn down, not the whole amount of the loan upfront. As a result you have lower repayments.

#2 – What is a construction home loan

A construction home loan, is a loan which provides you with the funds to pay your Builder (or with some lenders fund your Owner-Builder project) through each stage of your build or major renovation.

#3 – How do "Progress Payments" work?

A typical building contract is broken up into 5 or 6 stages. At the completion of each stage your builder will issue an invoice for the work completed and if the work has been suitably completed the lender will pay the builder. This is called a progress payment.

Typically a building contract will include the following stages – Slab, Frame, Lockup, Fitout and Practical Completion. Some lenders will arrange for a valuer to visit the site before making a progress payment to ensure the work has been completed, others will rely on you to sign off at each stage and will only get the valuer out at Practical Completion to confirm that the construction has been completed as per the original plans and specs.

What are you looking to do?

- Building your first home?
- Build your dream home?
- Adding an extra bedroom and a new kitchen for your growing family?
- Building your first investment property?

Whatever your reason, I am here to help you through the process from putting the application together, through to ensuring that the progress payments are made to the builder.

Use the link below to make an appointment for a free and no-obligation chat about your plans and how best to fund them.

Best of all, we don’t charge you a fee to use our service as we are paid by the lender when your home loan settles.