CONSTRUCTION
LOANS
A construction loan is type of home or investment loan that is used to build a new property or structurally renovate an existing property.
Most lenders typically require construction to commence within 6 months of approval and it needs to be completed within 24 months, so you won’t want to waste too much time getting stuck in. A construction loan is generally drawn down in stages, commonly referred toas progress payments. These progress payments match the schedule of works in the building contract know as stages. A build is usually broken up into about 6 stages, similar to the example below:
- Deposit: This is usually 5% of the total build cost and covers the initial cost to inspect the site and apply for the development approval. Our experience has shown that it is much easier to organise to have these funds available beforehand, rather than arguing with the lender to release funds prior to formal approval. Our friendly brokers can show you how this can be achieved.
- Slab or Base Stage: The site is levelled at this stage, and the foundations and slab are laid, as well as the plumbing and waterproofing of your foundations.
- Frame Stage: During this stage, the wall frames and roof trusses are erected. It also covers partial brickwork, the roofing, electrical and rough in the plumbing.
- Lockup Stage: This is the point when the house can be locked up, allowing the house to be secure. The external cladding should be completed, and all windows and doors installed.
- Fit Out or Fixing Stage: This is when the internal fittings and fixtures of your property are installed. It covers all internal cladding, waterproofing, skirting, cupboards and benches, electricity, plumbing and gutters.
- Practical Completion: This is the final stage where the builder will organise for you to do a “walk through” of the property with the site manager to give you an opportunity to point out any areas that still require attention. It is a wise choice to pay for a consultant to carry out a pre-handover inspection to make sure your home has been built to specification.
If you are thinking about getting a construction loan then you will need to get in contact with one of our expert mortgage brokers by calling 02 9934 9735 or