Construction loans are the type of home loan needed if you are thinking of building your new home or renovating your existing home. However construction loans differ quite substantially in comparison to a normal home loan.
How Construction Loans Work
As you build your home the builder supplies progress payments so the bank will not give the builder all of the funds straight away from the construction loan. As each stage completes the bank will make the payment from the construction loan so that you will only pay interest on the amount you have actually used. Think of the construction like a giant credit card, you only pay interest on what you owe.
Construction Loans – how they work - we discuss this in more detail in this article.
What can the Construction Loan be used for?
There are a number of purposes that you can use a construction loan to enable you to either build your dream home, build your investment property portfolio or to renovate.
- You already own the land and you wish to build on the land to live in
- You wish to purchase a house and land package
- Investment construction for an investment property
- Off the plan construction
- Home Renovation Loan
- NRAS Property home loans
- Owner Builder Home Loans
- Extension Home Loan
Important Construction Loan Features
When searching for a construction its imperative that the loan to build your home has some very important features and favourable bank policies to make sure your construction loan is not hindered in any way, provides flexibility, no higher than normal fee structure and no delays in having progress payments made.
An example of what we mean is some banks do not allow you to include quotes for some items outside of the construction contract – driveway, landscaping, floor coverings just to name a few. This means choosing the wrong lender would force you to have the builder include all these items where some builder add an additional 20% to 30% margin to these items meaning you pay more!
We know of other lenders who send a valuer out each time a progress payment is due. These valuers have 4 working days to submit the report back to the bank to confirm progress has happened to which they bank will take a further few days to pay. Most builders require 7 days (not working days) for payment meaning choosing these banks could result in penalties and additional fees from the builder as the invoice was not paid on time.
We know which banks, building societies, credit unions and specialist mortgage lenders have favourable construction terms and which have very restrictive terms. Make sure you use an expert!
Types of Construction Loans available
Not all construction loans are equal and in fact not every bank offers all types of construction loans. Below is the list of niche categories:
- No Deposit Construction Loans with family as guarantor
- 95% Construction Loans (genuine and no genuine saving options)
- Construction Pre-approval home loan
- Lo-doc Construction Loans
- Discount Home Loans for 75% and 80% lends
In summary we specialise in constructions tailored to your situation whether building your family home, investment property or a luxury home, we will find you the right lender.