Construction Loans
What is a Construction Loan?
A construction loan is specifically designed to help finance the building of your new home. Here’s how the process works:
- Secured by the Property: The loan is secured against the property you’re building and is typically disbursed in stages. These payments align with the completion of different phases of your construction project.
- Application Requirements: To apply for a construction loan, you’ll need to provide the building contract or tender, council-approved construction plans, and any additional quotes for extras like landscaping. If the land isn’t already owned, you’ll need to secure it with a contract of sale.
- Valuation Process: A lender-appointed valuer will assess the property’s estimated value once completed. Your loan will be based on the lower of either the land price plus construction costs or the estimated value at completion. Keep in mind that not all construction additions will necessarily increase the property’s value.
- Loan Approval: Once approved, you’ll receive a loan offer. After reviewing and signing the loan agreement, you can move forward with the construction.
- Builder’s Documentation: Before your builder can begin receiving payments from the lender, they must provide essential documentation, including insurance details and stage invoices that follow the agreed drawdown schedule.