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A Construction Loan is for borrowers wanting to build a residence. Some construction loans allow you to use the home loan to purchase the land first and then construct a residence on it within the given timeframe (normally 2 years).

Mortgage House also offers land only loans which allow you to purchase just the block of land, without having a building contract or council approved plans.

Aimed solely at borrowers building a residence, the Mortgage House Construction Loan features an interest only repayment structure during the construction process (with up to 2 years finance of the land before construction), and principal and interest repayments after construction has completed.

The Construction Loan is designed to be drawn down in stages as your property is being built. This results in your monthly repayments gradually increasing as construction progresses until the building is finished avoiding high home loan repayments upfront.

Borrowers must have council approved plans and a fixed price tender from a registered builder to qualify for the Construction Loan (owner builders are acceptable at 50% loan to value ratio). If you have any equity (ie you have saved 20% of the construction cost and only borrowed 80% of the construction cost), you must use your funds first before drawing down on your Mortgage House Construction Loan.

For building contracts over $400,000 we will arrange a progress inspection at every loan drawdown request. If you would like to make any variations to your building contract, ensure you check with us before proceeding.

The construction must be completed within 6 months from the date you started, however you have 2 years to commence construction from when the Mortgage House home loan settles. Upon completion of your property, the Construction Loan reverts to a standard variable rate home loan.

CONSTRUCTION LOAN TIPS:

• Get everything in writing and signed. Have your solicitor check it.
• Get a number of quotes from builders and compare them. If there is a large variation between quotes, ask them to requote with a better price and include more details.
• Ask your builder for a list of references and if possible, drive past and see their work. Ask their past customers how they found the experience and the quality of their work.
• Ensure the builder is aware of and able to comply with the 6 month limit to complete construction.
• Arrange your insurance covering the full replacement value and ensure the correct First Mortgagee is listed (your home loan lender will be able to provide this information).
• Check your builder has all the necessary qualifications and insurance policies (such as indemnity insurance, public liability insurance and warranty insurance etc) to carry out the construction work.
• Provide your builder with the list of details required, by Mortgage House, to appear on their invoice to avoid any delays in payment.

Check they have a valid license and there a no claims against this builder.

Your state licensing office will be able to assist you with this, please find relevant links below:

• Master Builders Association
• Housing Building Association

Check the builder's reputation:

NSW	Office of Fair Trading Home Building Service
QLD	Building Services Authority
VIC	The Building Commission
ACT	ACT Planning & Land Authority
SA	Office of Consumer & Business Affairs
TAS	Register of Accredited Building Practitioners
WA	Builders Registration Board
NT	Northern Territory Department of Planning and Infrastructure

There are five drawdowns for a Construction Loan. These are generally:

• Slab down - 15% of total construction cost
• Frame up - 25% of total construction cost
• External brick work completed - 20% of total construction cost
• Lock up stage - 20% of total construction cost
• Practical completion - 20% of total construction cost

Please note that these may vary depending on your builder and your building contract.

• Minimum home loan size $100,000. No maximum home loan size.
• Maximum Loan to Value Ratio 90%. Full doc home loans (exclusive of Lender's Mortgage Insurance)
• Maximum Loan to Value Ratio 80%. Low doc home loans (inclusive of Lender's Mortgage Insurance)

Until construction is complete repayments are interest only after which they may become principal and interest or remain interest only. Home loan repayments can be made fortnightly or monthly from your nominated bank account either by direct debit or direct salary crediting.

The interest only portion is available for up to 5 years.

The total home loan may be split between 2 accounts after construction is finished.

This enables identification of personal and investment debt and to vary each split in terms of variable and fixed rate portions - depending on the nominated product after the construction period.

Construction Loans:

Click on one of the Construction loans below for further details

• 1st Rate Mortgage Plus Home Loan
• Advantage Home Loan
• Advantage Plus Home Loan