Are you in the market and looking for consutrction loan? The building or renovating your own home is a challenge, but it’s one that can bring big rewards. At Lend A Loan – Mortgage Brokers Melbourne we’ll help you find the right loan to suit your project, so you can stop worrying about the money and start choosing paints and painters. Many lenders offer construction loans, and each will be slightly different.
In general, you can expect to be able to draw down on the loan as you need the funds, which saves you interest. You can also expect to make interest-only repayments until your project is completed, keeping your repayment costs down while you’re paying to live somewhere else.
What is a construction loan?
A property construction loan is a loan type designed for people who are building as opposed to purchasing an established residential or commercial property. It has a different loan structure to your standard home loans and commercial property loans designed for people buying an existing property.
A construction loan has a progressive drawn-down. That is, you can draw down the loan as needed to pay for the different stages of the construction or renovation progress invoices.
The amount that will be available to borrow will be partly based on construction cost and the value of the property upon building completion of the property.
A construction loan will usually be interest-only over the first 12 months and then revert to a standard principal and interest loan.
How Construction Loans Work.
Construction loans are simple once they’re set up, keeping payments to a minimum.
- Your builder will require payments to be made when each stage is completed, such as slab, roof, lock-up etc.
- Interest is only payable on the amount you have drawn down or already paid to the builder, so your interest repayments will increase in stages as you get closer to completion.
- You will be required to contribute funds from the deposit before your lender allows a payment to be made from the loan.
- Most lenders will allow you to refinance an existing land loan when you apply for the construction loan.
- You should be able to borrow up to 95% of the value, but if that’s the case, then Lenders Mortgage Insurance will apply.
There really isn’t a shortage of choices when it comes to construction loans in Australia. Homeowners have plenty of choices – but it’s still worth knowing what they are and what to look for. If you are in the market for a construction loan and would like more information about construction loan you can call us 1300 861 336 or email us [email protected]