Construction loans are for those who are looking to;
Build a new home
on their own land
Buy a house and
land package
Renovate their own
home or investment property
Small scale
property development for personal or investment use. Usually, four
or less units on one property.
For larger scale
construction and property development go to our commercial lending
website at
Commercial Loans
How does finance work
for construction mortgages?
With most
construction loans you make interest only repayments during the
construction period. After construction has finished you can choose
to make principle and interest payments or continue with interest
only repayments.
During the
construction phase you only pay interest on the amount you borrow
for each stage of the building process. Typically construction is
completed in five stages and you draw down on the money at the
beginning of each stage.
Therefore, if the
total borrowed amount is $300,000 and you only require $100,000 for
the first stage of development then you only pay interest on
$100,000 and not the entire loan amount.
Building a New Home On Your Own Land and House and Land Packages
This is where you
purchase the land then construct your home. Typically, you would
apply for finance for the land purchase and then apply for
construction. Some lenders offer more flexibility than others that
help reduce the costs of application and switching fees.
Most lenders
require professional builders and contractors to construct your new
home. Owner builders - those who want to build their own home - find
it more difficult to find finance and require a larger than normal
deposit or provide greater security to build.
The same applies
for house and land packages but lenders are more secure in providing
finance when they know that construction is going to be completed
buy a professional builder.
Renovating
Finance for
renovations is similar to that of building your own home but the
most popular method is to apply for a "equity line of credit loan"
which allows you to borrow against the equity in your home.
This allows you
to draw down as little or as much money as you require without
restriction up to your approved limit. It acts very similarly to a
credit card where you can make interest only and or principle
repayments at home loan interest rates.
