We often have customers who are building a new home come to us for finance, not realising that the type of loan they require differs from a standard home loan. If not explained properly, the extra steps can first appear complicated and time-consuming.
We have assembled some of the most common questions we often encounter and provided some concise answers – so you don’t feel overwhelmed by the process.
How is a construction loan different to a standard home loan?
The most significant difference with a construction loan is: The loan funds are made available in a series of progress payments to reflect the building process instead of having the full amount provided at once.
What are the advantages of this?
Interest on your loan accrues based on whatever has been drawn down (paid to the builder). As they occur in time with the stages of construction, you only have interest accruing on the amount that has been paid to the builder at the time - rather than the entire amount.
What are the stages?
Construction loans usually consist of:
- Slab down
- Plate High
– Brickwork or Frame Complete
- Roof Cover or Lockup Complete
- Lock Up Complete or Fixing Complete
- Practical Completion
What happens once construction has been completed?
Once the home has been complete the loan reverts to a standard mortgage and, unless otherwise arranged with your lender, you will begin paying your full contracted repayments on the loan.
How important is finding a good lender?
There are multiple parties involved when financing a new home. It is important you have a lender by your side who is experienced with construction finance works so that you can be confident in having a smooth process.
Here at Bluebay Home Loans specialise in construction loans and work together with some of Australia’s largest builders, which is why we have gained a reputation as the finance experts for those building a new home. So contact us today to take advantage of our unique products.