A construction home loan is a type of home loan designed for people who are building a home or doing major renovations, as opposed to buying an established property. It has a different loan structure to home loans designed for people buying an existing home.
A construction loan most commonly has a progressive drawdown. That is, you receive instalments of the loan amount at various stages of construction, rather than receiving it all at once at the start. You generally only pay interest on the amount that is drawn down, as opposed to on the whole loan amount. Several lenders offer construction loans that are interest-only during the construction period and then revert to a standard principal and interest loan.
Lower interest rate -The benefit of financing big renovations with a construction loan, rather than a personal loan or a home equity line of credit, is that you’ll generally pay a lower interest rate and have a longer repayment period as you only pay interest on the amount drawn down, not the total amount.
Getting approved for a construction loan is a different process to applying for a standard home loan on a constructed / built home. You’ll also be subject to normal lending criteria, so you will provide details of your income and expenses. This is then followed by a property appraiser’s estimate of the expected value of the property when completed.
For each stage of the construction process, you’ll usually have to confirm that the work has been done, complete and sign a drawdown request form, and send it to the construction department of your lender. Your lender may also request an invoice from your builder for the cost of the work done.
Sure Finance has years of experience in facilitating construction loans and is best positioned to help you with a construction loan.
In progressive drawdown, payment of the loan is paid in parts, at each stage of the construction.
Mutiple documents are required related to expenses/ permits /builder and it varies from state to state . Hence it is advisable to contact your broker for further details
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