What is a construction loan?
Construction loan – is a type of home loan designed for people who are building a home. It used to finance the building of a home or another real estate project. Construction loans are very common for house and land packages and consumers who are completing renovations on their existing home.
It has a different loan structure to home loans designed for people buying an existing home. In Australia, there is a large selection of construction loans.
A construction loan will usually be interest only over the first 12 months. Then it revert to a standard principal and interest loan.
Qualifying for a Construction Loan
Banks and mortgage lenders often use building loans for many reasons. building a house the bank will release the payments to the builder over 5 “progress payments”. The bank will usually send a valuer out to your building site after various stages have been completed. It is dooing to make sure the work is up to scratch for that stage of the construction; then they will release the next payment to the builder. Below are a few tips that you may need to know:
- Fixed Price Builders Contract – Every lender will require a fixed price builders contract so the cost of the build can not be blown out during construction by poor estimations by the building company. This requirement protect you and also the bank. Your Premium mortgage broker will explain the details of the contract to you in detail.
- Detailed Specifications. The lender will also need detail specifications to so the valuer can easily complete a valuation using the plans and specifications before the bank formally approves your finance..
- Approved Plans – the bank will require council approved plans before they issue approval.
- Home Value – A few months after construction is complete we may be able to ask the lender to order a new valuation on your completed property. If you are lucky, the value of your finished home may be worth more than the combined cost of the land and construction.
Premium Mortgage Brokers are experts in Construction loan. If you want to know anything else please contact us/a>. You can contact us without leaving home.