Construction Home Loans
Building Your New Home Starts Here
I personally have extensive experience in the field of construction, with previously being a building supervisor within the construction industry. With this previous experience, I can share my knowledge with you to help you understand the complete building process, giving further insight and understanding as required as to what to expect on each of the building stages, start to finish.
Construction home loans are usually variable rate loans designed to help finance the construction of a new home or renovations to an existing property. During the construction phase, repayments are typically interest-only. Once the building is complete, the loan will convert to principal and interest repayments. The first drawdown of the loan will cover the settlement cost of the land you're purchasing (unless you already own the land or purchased it previously with a land-only loan). Upon settlement, you'll begin making interest-only repayments on the land portion of the loan, until construction begins.
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For example (without factoring in deposit or stamp duty) if the land costs $500,000 and the build costs $350,000, the total loan amount would be $850,000. At land settlement, you'd start making interest-only repayments on the $500,000 loan, then adding the progress payment amounts to this amount until construction is fully funded.
There are typically 7 stages in the construction process when progress payments are required. Payments are made only once each stage of construction is completed. They are: 1. Initial Deposit – 5% of the total build cost.2. Progress Payment 1 – Base (slab) Stage.3. Progress Payment 2 – Frame Stage.4. Progress Payment 3 – Enclosed Stage.5. Progress Payment 4 – Fixing Stage.6. Progress Payment 5 – Practical Completion Stage.7. Final Payment – When the build is fully completed and ready for handover.
As the builder completes each stage, they will submit a progress payment request. These requests must be forwarded to your bank or broker for approval promptly, as builders typically expect payment within 5 business days. Failure to meet this deadline may result in the builder halting work until payment is made.Each approved progress payment increases the amount drawn from the loan, which will impact your monthly repayments until the project is completed. The lender will also carry out inspections at various stages of the build to ensure the property meets building standards before releasing funds.
Construction loans generally require that work begin within 6 months of land settlement, with the entire project to be completed within 24 months. However, there are other loan options available if you wish to delay the start of construction, such as land-only loans. I have in-depth knowledge of the construction process, with my background as former building supervisor. This experience allows me to provide you with valuable insights into the building journey, ensuring you’re well-informed about what to expect at each stage.
Ready to start building your dream home? Get in touch through the contact form below!
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