Building your dream home
For many people, the quest for their perfect home is not limited to pre-built dwellings in existing locations. You may have seen a great house in the wrong location, or an empty block of land in the most ideal setting. Or maybe a house that would be perfect…if only it had three more rooms! Why not design and build your ideal home and watch your dreams come to life?
The chance to create your dream home designed from the ground up just to meet your exact requirements can be an immensely rewarding and thrilling experience. A construction loan is the best way to fund construction of a new home, or a major building renovation.
Since the process of building a home is significantly different to buying an existing home, the loan process is different and quite specialized.
How a construction loan works
Instead of being paid for in one lump sum, construction or major renovation projects are customarily paid off in stages as the project progresses past certain milestones.
A construction loan will require a construction contract that details the exact cost of the project, broken down into the amounts the builder requires as each defined stage of the construction is completed. Often the bank or lender will inspect the building work at each completed stage before authorising the progressive payment.
Contracts and projects will vary, but typically there might be four or five defined stages requiring a progress payment of a certain percentage; for example:
- Base or foundation slab – 20% of the total construction cost
- Frame up 15%
- Outer walls 15%
- Lock up 25%
- Practical completion 25%
Interest on a construction loan
Interest payable throughout the construction process is minimized as it is only calculated and payable monthly on the amount of money that has already been paid to the builder or ‘drawn down’. Your repayments will increase as payment for each stage of construction is made. Furthermore the loan is normally structured as ‘interest only’ up until completion, thus minimizing repayments to maximize your cash flow during construction. Usually upon building completion and the full amount being drawn down the loan reverts to a ‘principal and interest’ loan to start paying off the principal.
How do I get a construction loan?
You will need:
- Plans and specifications approved by council
- A fixed price building contract by a registered or licensed builder
- Construction insurance
What’s the best construction loan?
At we determine your unique needs, and find the most suitable construction loan from a range of lenders, to ensure it fits your circumstances and requirements. Our service is free.
When I bought my first property, I was shopping around to find a good deal and for my preapproval. It was very time consuming and often bank staffs were not available to answer my enquiries. I got in touch with Kathy who not only got me the necessary finance in but also was able to spend time to explain different types of loan. That saved me lots of time and effort. Since then I have purchased number of investment properties using her services. Kathy is very professional and friendly and has put in lots of hard work, time and diligence to get me finance. Buying a property can be stressful but Kathy has been very patient in answering all my enquiries. My family members and colleagues have also used Kathy’s services for obtaining finance and are very happy with her professional approach.Christian Onesimus
Kathy has helped refinance my home loan previously and has now helped me sort out an investment property loan. Kathy keeps me up to date with interest rate trends and deals every month with her monthly emails. I have found her to be very professional and very knowledgeable in every aspect of mortgage broking. She is more than willing to pass on information about her own investment strategies and has provided me with a contact to source my first investment property. She makes investment easy and is easy to communicate with. I would highly recommend Kathy to anyone who is looking to obtain or refinance be it for your home or investment.Dougal Brown