CONSTRUCTION LOANS AUSTRALIA
What To Know About Construction Loans
The main difference between a standard mortgage and a construction loan is that with a standard mortgage, the property being purchased serves as security for the loan. With a construction loan, the property being built serves as security for the loan. This means that since there's no guarantee that the property will be finished or even sold once it's completed. Rates for construction loans are charged higher than those of regular mortgages.
Construction loans are also typically shorter-term loans than regular mortgages, because the lender wants to make sure that they're repaid before the property is completed and sold.
How construction loans work
A construction loan can be a great option for home buyers who want to build their own home. It can also be helpful if you're buying a fixer-upper that needs some repairs or renovations before it's ready to live in. Another use for a construction loan is to finance commercial properties.
When considering a construction loan, it's important to work with a qualified lender who can help you navigate all of the options and requirements.
Benefits of construction finance
Draw down feature
You can draw down in each phase of the construction and only once you approve the inclusions and quality of workmanship.
Less interest payments
Construction loans are interest-only until the construction is completed. Interest only applies on the amount used.
Structure your loan
Additional payments into your construction loan are optimal to reduce the total loan balance. This offers convenience and flexibility.
Save
You pay a smaller stamp duty fee for a construction loan. You also have opportunities to receive grants and concessions since the government incentivises building houses as opposed to buying existing ones.
No dodgy builders
You are protected from sloppy construction and unqualified builders since lenders require licence and insurance policy. You’ll release the progress payments only every after stage completion.
Frequently Asked Questions on Construction Loans
Who offers owner builder construction loans?
There’s a select few lenders who offer this type of construction loan, and it comes with a stricter set of requirements, e.g., a deposit of 30% of the total value of the land and construction cost. You also have to be a licenced builder when you take out an owner builder construction loan. Some lenders that offer this are Westpac, St. George, Commonwealth Bank, BankSA, NAB, AMP Bank, and Bank Australia among others. To know your options, ask a finance broker Australia with access to these lenders.
How do land and construction loans work?
When you take out a construction loan, you’re actually taking out two loans: one for the land, and one for the construction costs.
The lender will ask to see evidence that you have the funds available to purchase the land, as well as detailed plans and specifications for the project. They’ll also want to know how much your contractor has quoted for the project, so they can make sure that the total cost of construction won’t exceed the amount of the loan.
How can I get a finance broker specialist to help me in my construction loan application?
An expert finance broker can help you prepare and submit your paperwork, and they will organise a ‘Tentative on Completion’ valuation to determine the estimated worth of your property, equity, and loan-to-value ratio (LVR). In addition, they will also liaise with the lenders offering the best loan products in the market to ensure you get the correct construction financing solution for your project.
How can I use my equity or savings to get residential construction loans?
Using your home equity and even savi ngs or investments to secure loans for home construction could get you a better interest rate. To be able to use this financial resources, it is most ideal to speak to a finance broker NSW for professional assistance and advice.
If my building is delayed, will my construction loan take a hit?
If your construction takes more than 24 months to complete (counting starts from first drawdown), this could impact your loan. Talk to your mortgage broker to discuss the terms stipulated in your Letter of Offer and see how it goes from there.
Can I use home construction loans to finance home embellishments?
Unfortunately construction loans on existing homes are only available for those building a new home from scratch or doing substantial renovations in their property. If you only need a loan for home decorations and less complicated facelift, ask a finance broker Sydney to help get you a separate loan.
Why work with Stryve Finance broker for your construction loan financing
Stryve Finance has years of experience in construction loan financing, and we can help you get the loan you need to get your project off the ground. We'll help you find a construction loan that fits your budget and timeline and answer any questions you have from start to finish.
Contact us today to learn more.
We offer flexible lending solutions for construction financing
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