Construction Finance Solutions

Construction loan products usually inherit the same interest rates that an established dwelling would. The impacts of the interest rate will be the lender of choice, the amount  you are borrowing against the value of the property and also the product ype you select/ With in-depth knowledge and understanding of the construction home loan industry and close relationships with their clients, we are perfectly placed to seek out and recommend competitive or otherwise appropriate choices. 

The financial position of the applicant in question plays an important role in the conditions of construction home loans, and this is why it is crucial to have an open, honest relationship with your construction loan broker. They can only offer you effective, proactive advice and guidance if made fully aware of the facts.

Qualifying for a construction loan differs slightly from applying for a standard loan on an existing property. All the usual documents needed for home loan applications will be required with additional some documents, namely:

• Two recent pay slips
• Three most recent bank account statements
• Evidence of the required deposit
• Sale contract/proof of ownership for the land
• Approved council plans/permits
• Professional building plans/fixed-price contract from a licensed builder 
• Proof of builder's insurance

When you apply for a construction loan, it is inextricably linked to the building contract you have in place. This will already have a detailed description of each construction phase, including payment schedules and predicted building costs. This is considered final and binding by the lender, and even seemingly insignificant changes may lead them to reassess your construction home loan application. Additional work for features like swimming pools and external structures will also require specific, detailed quotes. 

• Qualifying for a construction loan

To qualify for a construction loan, the lender may insist on sending someone to your intended building site to provide them with a trusted valuation of the proposed property. Once they are satisfied with the estimated value of the completed property, you will be asked to pay a deposit as you would with any standard home loan.

• Approval

Once all the criteria have been met, your application will be assessed and either approved or rejected. If approved, you will normally receive a construction loan agreement pack and the first injection of funds to acquire the land from the vendor. 

• Progressive draw-down (staggered payments)

Each subsequent construction stage will now be funded as the former is completed and inspected by a representative of the lender.

• Completion

When the home is completed, an occupancy permit from the local council will be issued, and the property will be officially habitable.

• Loan reversion and maintenance

On completion of the property, your loan agreement will revert to a standard home loan, which you are now expected to begin paying back in stages. 

Construction home loans are a superb way for borrowers to retain as much cash flow and accessible working capital as possible during a building's construction. However, they do not come without disadvantages and certain levels of risk. If we look at home construction loans from the lender’s perspective, we can imagine how hard it is for them to value an unbuilt property accurately. This uncertainty is often reflected in higher fees, especially those for valuations. 

Constructing a property seldom runs as smoothly as is ideal, and very few projects encounter no stumbling blocks or forced changes along the way. Lenders understand this all too well and will keep tight reins on the flow of capital, insisting on regular inspections to ensure things are progressing as promised. A large amount of preliminary work often needs to be done before any application can be approved, and the amount of paperwork can be intimidating. This is another reason why engaging the services of a reputable construction loan broker is the only sensible way to proceed.