Property Construction Loans

Construction loans are unlike a standard home loan so it is vital to understand what you are entering into.

Construction loans can be drawn down in stages or funds given to you upfront depending on the amount your need and what work is to be completed. It also means that your monthly repayments increase as the construction moves forward until finally at conclusion of construction the loan repayment reaches its full monthly repayment sum. Some banks or lenders can offer interest only repayments throughout the construction and will change to principle and interest repayments once the construction is finished.

To qualify for a construction loan you will need to have approved plans and a fixed amount tender/contract from a registered builder.

For a building contract progress inspection are required at each mortgage loan drawdown and is arranged by the Bank or lender. Talk to us if you need to make any changes to your building contract, prior moving ahead.

Construction Loan Progress Payments

In a construction loan your builder is typically paid in draw downs (known as progress payments) which happen when each part of the work is finished. This means that your mortgage will slowly increases as the construction moves forward until finally at completion. Builders usually will send you an invoice when a progress payment is needed. Some building contracts will require an inspection and every draw down to make sure the work in the contract is completed and this inspection will be carried out by the lender. Once the payment is approved by the Bank/Lender, your builder will be paid from your loan account.

Most construction contracts will have 5 progress payments. These are generally set out in stages

• Laying the slab
• Completing house frame
• Outer walls completion
• Lock up
• Internal completion