Construction loans.
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Land and Construction
When you are looking to build a new home or renovating, you want a home loan that can grow as your new home does. You need to access funds as your progress through each stage of the building or renovation process.
We manage the process from start to finish including assisting with the management of the progress payments.
Most construction loans have a variable interest rate, this is to allow for the loan to be progressively drawn as the construction or renovation of your home occurs.
Approval for a land and construction loan is a little different to approval for an established home. Often the land and building purchase will need to settle separately.
During the building or construction period, you only pay interest on the part of the home loan that has been drawn down, or paid out to the builder. You will not have to make a full loan repayment until your home is completed.
Most lenders will also require that you build on your land within two years of actually settling on your land. The construction of your home or completion of your major renovation will generally be conducted in stages, with payments required at the end of each stage.
Your construction contract will detail the exact cost of the build, with the cost broken down into the payments the builder requires at each stage.
There are six general stages of construction:
Deposit:
- Preparation, plans, permits, connection fees, insurance and soil testing
Base:
- Concrete slab/footings completed
Frame:
- House frame completed and approved by building surveyor/local government
Lock Up:
- Windows/doors, roofing brickwork and insulation is now completed
Fixing:
- Plastering, kitchen, bathrooms, tiling and internal fittings/fixtures are now completed
Completion:
- Home is now completed with site and house cleaned and ready for occupation after approval by building surveyor/local government inspector
At the completion of each stage, the builder or service provider will present you with an invoice. In order to make the stage specific payment to the builder you will forward this invoice together with your lenders authority to make the payment to the lender.
Your lender may also require an inspection and valuation of work completed so far. A fee may be charged by your lender at payment of each stage.
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