Building/Construction Loans
Getting a new home built can be a dream come true so it’s important that the construction finance you secure helps you live that dream instead of turning it into a nightmare.
Construction or Building loans are slightly different from regular home loans for existing properties. For instance, when you buy a traditional property, a financial institution loans you a certain amount of money upon settlement and you simply move into that new home.
When building a home the process is different. At each construction stage you’re required to make payments on your new property. The lender helps facilitate this. They approve the overall loan amount but provide it to you in progressively drawn payments to correspond with the builder’s payment schedule. The builder sends an invoice to the financial institution at each stage of construction and the financial institution draws down payments to meet the builder’s fees. Once construction is complete and the builder ahs received all payments, your building loan then resembles a traditional home loan.
Things to consider when securing a Building or Construction Loan
Naturally, the easiest construction finance option in the eyes of a lender is if you buy a house and land package from one company but naturally, life isn’t always that simple. After all, you might find a vacant block of land in one suburb, buy it then months down the track find the perfect builder somewhere else. That doesn’t stop you from securing finance. It might simply mean that you need to arrange two separate loans – one for the purchase of the land and then another for the construction.
When it comes to your choice of builders, most financial institutions want to be sure that the home is constructed by a licensed builder. After all, it’s in their best interest that the property is well-built and secure. Having said that, some financial institutions are more lenient when granting construction or building loans. In fact, some won’t need you to engage a licensed builder – it may be possible for you to act as owner builder on the project (under certain conditions).
As with all types of home loans, there are many variables to consider when securing construction finance. Ensure you get the loan with the right flexibility, the right interest rate and the right terms for your individual needs, talk to an experienced Wealth Concerns mortgage broker.
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If you would like to discuss your specific circumstances call us on 1300 700 496 or alternatively text your name and number to 0411 320 962 and we will call you.