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Build your dream home with a construction loan. The funds will be paid to you in drawdowns ensuring you only pay interest on the portion of the construction loan you have drawn down

Types of Construction Loans

Variable Home Loans

Fixed Home Loans

Construction Loans

Split Home Loans

Construction loans operate a bit differently than traditional mortgages on an existing property. You’ll need to get conditional, or pre-approval for the construction loan and the mortgage that will replace it once the property is built.

You will need to bring the following types of documents into your meeting with one of our Construction Loan Specialists:

  • Copies of your current payslips and other income you receive like rental income or monthly pension payments
  • Copies of your current liabilities like home loans or credit card debt
  • A detailed budget showing your living and monthly expenses
  • Current and past employment and address history for the past few years.

Once you decide that you’d like to build your dream home, we’ll help you determine if the quoted land and construction costs are reasonably priced for the area.

Next you’ll want to do the following:

  • Arrange an in-person inspection of the building site
  • Write up your offer to purchase, conditional on approval of your fixed price contract/construction loan and the results of the inspection
  • Negotiate a ten day time period in which you can complete an inspection and receive your loan approval.

Construction loans are also known as fixed price contracts. We lend a fixed amount to cover the cost of construction but retain the funds for you.

Mortgage House then will make progress payments to your building contractor on your behalf as your contractor finishes each stage of the project. Most loans cover construction over a twelve-month period and are then converted into a mortgage loan upon completion of the project.

Generally, this type of loan covers only construction costs, not the cost to purchase land. However, we have many loan products to help you purchase the building lot also.

What is a Construction Loan?

Mortgages can get tricky when it comes to building a new home. Aside from risk or questions about investment, there is a lot going on, and having access to your money when you need it is important. Finding the right construction loan can be just as important for builders as it can for those constructing a dream home for their families. That is why at Mortgage House, we can help track down construction loans that can suit either registered builders or owner-builders.

The main advantage of a construction mortgage is you can stagger the drawdown of your loan as your property reaches certain stages, once there is proof the agreed work has been completed. The main benefit of these loans is that money will be paid to you when needed, which means you only pay interest on the amount of money you have used. You have two years 18 months after your settlement to complete construction of your dream home. You will also have the benefit of knowing that these mortgages automatically then revert to a standard variable mortgage.

What do I do before I choose my construction project?

Construction mortgages can work a little bit differently to residential mortgages on an existing property. The first thing you will need to do is get pre-approval. Either owner-builder or commercial builders can apply for construction mortgages, and our construction loan specialists can help both get the money they need. To get pre-approval, make sure you have copies of your current payslips and any other income you receive, as well as any liabilities you have, such as credit card debt or other loans. Before you start looking for new home, it’s always a great idea to develop a detailed budget showing your monthly expenses. Make sure you have that available so we can use it to help you get a loan. Also, make sure you have evidence of your recent employment history, as well as proof you have lived where you now live for the past few years. We will work hard with our extensive range of mortgages and lenders to suggest an appropriate loan for you.

construction loan

What happens next in the building and construction process?

Once you have looked at the mortgages on offer and chosen your construction loan, it’s time to do the fun stuff – pick your dream house and land package. At Mortgage House we can help you there, as well. We have a range of resources and data help your dream get off to the best start possible. Once you are happy with what you are being offered, and you want to move forward with the purchase, the next thing to do is arrange a visit to the construction site, so you can inspect everything first-hand. If you are happy, it is important to then write up your offer to purchase, conditional, of course, on the approval of your construction loan and any formal inspection you might want to do. We always advise our customers to negotiate a 10-day period to complete your inspection and get loan approval. That allows you a bit more time to think about things, and ask any more questions you may have. We want to make your dreams come true, and are happy to go the extra mile to make it happen.

Where do I find the best residential loans?

Once your home has been constructed, construction mortgages revert to standard residential variable loans. Our standard variable mortgages give you access to more features than a basic residential loan. Firstly, you will have access to redraw and offset facilities, which can add to your flexibility in the long run. You also have the ability to make extra payments, which can help you pay off your loan sooner, and also reduce the amount you pay in interest. Our standard variable mortgages can also be split into periods of variable and fixed rates, to help you deal with whatever life throws at you. As an independent lender, we have access to the same resources as traditional brokers, and we provide a wide range of tailored, flexible and competitive rates. Our secure and innovative online services can help save you time and money in the first instance, and our highly-skilled staff can walk you through every step of the journey. As one of Australia’s most awarded non-bank lenders, our experts can help you work through all the jargon and suggest the best mortgages for you and your family.

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