Construction Loans
Back to services
Build your future.
Loans for construction are designed to lend money for people wanting to build their own homes and for homeowners who are renovating their own home.
Construction loans are typically packaged together with land; this is known as a house and land package, which many of the larger builders encourage for first home owners. You can purchase your block of land and build at a later date, or purchase your land and have your construction loan ready to go. Construction loans only cover the cost of the build or renovation of the property, rather than the purchase of the land and are intended only for the building portion of your project.
There are a number of prerequisites to a construction loan. The lender will want to see the following:
- Council-approved plans
- Contract with builder (typically a fixed price contract)
- Builders insurance
- The builder’s licence to build
As a minimum, unless you have these documents a lender will simply not approve your loan and advance funds for construction.
Your financial plan
Construction loans are a very different product to a standard home loan. Construction loans are typically interest only, meaning you pay interest on the amounts being advanced—although this sometimes varies depending on the lender. It's important to plan around this very convenient detail in the short term, and prepared for the loan to switch to principal & interest once building is completed.
As an example, if your construction loan has a value of $300,000 and there has been an advance of $50,000, you will only pay interest on $50,000.
It's in the details
Construction loans have time restrictions. Normally you have twelve months to begin building and then another twelve to complete construction. This in most cases will be ample time to complete your project. Typically a construction loan is advanced in stages such as foundation, frame and brickwork, lock up, second fix (plastering etc) and finally completion.
As your broker we'll help you keep track of the details, including liaising the builder, your lender, conveyancer and other third parties.