Construction Loan
Whether you are buying a vacant block of land to build your dream home, embarking on a rebuild on your existing property, or renovating your home, a construction loan is an ideal choice. This loan allows you to break up the loan into progressive payments, which usually coincide with the stages your home is reached as building proceeds. For new homes these stages might often include the land purchase, construction of the foundations or floor, construction of the roof and frames, lock-up and final completion.
Generally, repayments on a construction loan are charged on the amount that has been drawn down and are usually interest only. This rate can vary from lender to lender but usually hovers around the variable rate.
After each stage is complete, a valuer appointed by the lender will usually inspect the property and, if this is satisfactory, finances for the next stage will be released to the borrower. Once the construction is complete your loan will revert to your preferred choice of variable, fixed, principal and interest or interest only. It is important to establish your preferred choice or ensure you have the flexibility to move to a more suitable loan once construction is finished.
Most lenders, but not all will require you to enter into a fixed priced building contract with a licensed builder.
