CONSTRUCTION LOANS
Build your chances of loan success …
Find finance that fits
Building your dream home is different to buying an established home, and the finance is different too. Instead of a regular home loan, you’ll need a construction loan.
Construction loans are a more specialised type of loan, so not every lender in Australia offers them. Unlike a typical home loan, a construction loan covers the expenses you incur as they happen, throughout specific construction stages. This means you are only drawing down on the loan as needed.
Typically, a construction loan offers interest-only repayments during construction, in order to help with cash flow. Repayments then revert to a standard principal-and-interest loan once your home is fully built.
Key areas to think about
Set the right foundations by considering the following…
WHAT
LOAN TYPE?
Will you purchase land separately? Or are you looking at a house and land package? If you’re purchasing vacant land, then you’ll require a land loan – which is a separate product to a construction loan. Then, once you access your construction loan, you’ll have a set time to build your new home. The ‘progressive draw down’ of your construction loan will then allow you to make payments as the building progresses.
Owner
builder?
Construction loans for owner builders have much more strict criteria than standard construction loans. This typically includes an assessment of your qualifications, experience, and ability to manage the construction project. You may also be required to supply detailed timelines and plans before receiving approval.
Interest rates and fees may be different for owner builder loans when compared to standard construction loans, so you’ll need to make an assessment about the overall costs versus savings of being an owner builder. We can help you make the right decision.
RATE
IMPACTS
Construction loans tend to have higher interest rates than standard loans, as it’s harder for a lender to value a home that doesn’t yet exist. Constructing a property can also be risky, as there’s no guarantee of whether the build will be completed on time and budget. Your lender will need to inspect the house before releasing any funds, thereby ensuring funds are being used correctly and the project is keeping on track.
Lastly, you’ll need to factor in additional funds for finishing touches on your new home, as well as rent if you need to live elsewhere during the construction period.
How we can help
Just a few ways we can support you on your construction journey …
RENOVATIONS, NOT JUST BUILDS
A construction loan can be used for big structural renovations too, like extending the house or adding on a deck, but not for smaller cosmetic renovations like updating the kitchen and bathrooms. So if you’re looking at major renovations, talk to us to determine if a construction loan makes the most sense.
USING EQUITY
One way to fund your construction loan is to use any equity you have in an existing property.
Equity is a powerful tool for homeowners to use, and as long as you have enough equity to meet the loan’s deposit requirements – usually at least 20%, but sometimes more – you should be able to obtain a construction loan.
Equity in vacant land? You can still technically use the equity you have in a vacant piece of land to fund a construction loan, as land can increase in value just as a home can. If you have existing equity in property, let us help you make the most of it when choosing your next finance option.
PAPERWORK!
Construction loans have a substantial amount more paperwork than normal home loans. In addition to standard documents, you may need to provide:
- Council plans and permits
- Professional building plans
- Proof of land purchase
- Proof of contract with a licensed builder
- Proof of builder’s insurance
While we focus on the finance rather than the building process, our experience dealing with construction loans can help take the hassles out of your application.
We're here to help
And we're ready to talk as soon as you are.
Calculator
Honestly, we're mixed on loan calculators. Why? Because they're a great way to get a quick idea about loan affordability – but at the same time, there are a range of other costs associated with loans, and calculators don't take these into account.
So, feel free to have a play with the below. But for a true understanding of the best loan for you, let's have a chat.
WE’LL HELP YOU REALISE WHAT’S POSSIBLE.
