Building a home is a complex process
The process involves multiple parties including builders, lenders, solicitors, accountants, quantity surveyors and the council. With so many people involved in the process, there is always the possibility that some experts will not understand each other’s field and things may go wrong.
As a result, often construction loans are set-up with many errors. The loan amount may be incorrect or it may be delayed, due to constant amendments.
Each lender processes a loan in a particular manner. With a conventional loan, it is often much easier to have the loan submitted and approved in a timely manner. For a construction loan this system is often poorly designed and run by inexperienced staff. Documents are commonly lost and credit officers often lack communication skills. This can lead to misunderstandings and delays.
Our job as your mortgage broker is to fix these issues as they arise, and where possible, prevent them from occurring in the first place.
Our mortgage brokers are experts in construction loans.
We can quickly work out which lenders will approve your loan. In addition, we will structure your loan in a way that ensures your new home is built without the hassles.
Here’s what you can do with a Construction Loan
- Build on land you already own or use it to buy a new block of land to build on. Your loan amount will be based on the combination of land purchase and building cost.
- Consolidate debt, while you plan and build that extension or renovate your home. With variable rate, you can even invest in updating your home before you sell without being locked into a fixed rate loan.
- Some lenders allow you to borrow up to 95% of the property value during the construction period. Once construction is complete, you can choose from the range of home loans and roll-over your Construction Loan balance into your new home loan.
Drawdown funds only as you need them
One of the biggest advantages of a Construction Loan is accessing funds during the building progress. You don’t need to drawdown the entire loan amount at once, saving you on interest repayments.
In most cases, a building or renovation project is completed and paid for in stages. Construction Loans gives you the flexibility of making progress payments, so you can draw the loan amount in installments as the construction progresses.
Typically you may drawdown the loan in stages that cover:
- buying the land
- laying the pad (foundation or bearers and joists)
- roof building (along with framework)
- lock up (walls, windows and doors)
- final (drives, pathways and entries).
Remember, interest is only calculated on the amount you actually draw down. So if you have a loan for $250,000 and only need $50,000 at a time, your interest is charged only on each $50,000 you use.
At the end of the Construction Loan, you can select a home loan that suits you best, and your outstanding loan balance will roll-over into that account.