Construction Home Loan - Home Loans
A construction home loan is really a version of a standard home loan which rolls out in stages in different phases.
First you have the land purchase portion of your loan and then the
house or construction home loan (progress payments) unfold.
While you can readily get a loan for land purchase alone, if you are buying land with a view to construct and require funds for the land purchase, most lenders will try to set up the entire approval process for you from the outset through a construction loan
Your borrowing options are pretty much as broad as the home loan options available and your choices will naturally be driven by your personal situation.
There are typically 5 stages to a construction home loan
1. Pre approval for your land and house purchase
2. Land purchase and formal approval for your land settlement
3. Builder selection and formal loan approval for the construction portion of your loan
4. Construction commencement and loan drawdown
5. Construction completion and switch to P & Ihome loan(if applicable)
Pre-approval
When you sit down with us, we go through your unique situation with you in detail to get a clear understanding of your current financial position and future plans.
We will prepare your construction home loan application with you and along with your supporting documentation, submit it to your chosen lender for a conditional approval.
Land Purchase
Most lenders will require a commitment to a timeframe within which construction will commence if you seek funding to assist with the purchase of land alone. This timeframe can be as long as five years.
Construction Home Loan Approval
Allowed construction periods generally are not longer than two years. For construction loan approval, you will be required to present:
Your fixed-price building contract with a licensed builder, including proof of builder's insurance, current for the construction period. (If you are an owner builder, you will be required to present detailed costings including quotes and all relevant insurances)
Your council approved plans and specifications of the proposed residence
These loans require a level of flexibility and are therefore usually variable rate loans and typically interest only.
Progress Payments
Once progress payments commence, your lender will most probably require inspections at each payment release point. Your building contract should nominate the number of progress payments for the construction, but there are typically four (slab or floor, framework, lock up and completion).
Construction Home Loan Completion Switch
Once construction is complete, you will then typically finalise how you want to repay your home loan. You might then switch to a principal and interest loan and choose to repay your loan in monthly, fortnightly or weekly installments.
