When it comes to building a house, details can be everything. From choosing the block, to choosing the façade, to choosing the intricate interior options. The whole process is about details. And construction mortgages are no different. Having an idea of what the repayments can be over the life of the loan, including how much of it might be interest, can be another important detail of building your dream home. Our mortgage calculators can do that for you. While they are only a guide, they can give you a good indication of how much your repayments may be at the current interest rate level, or if you have a variable loan and the rate increases. They can also help you compare repayments of different loans, work out how much you might be able to borrow, and even how much stamp duty you may pay. This can allow you to plan for the future, with a lot of information at your fingertips. It is just one of the ways we strive to provide loan, product and service outcomes tailored to the exact needs of every client.
Will my mortgage repayments be the same with a construction loan?
Mortgage repayments for construction loans can be a little different to the traditional variable or fixed loan repayments. With most mortgages, the majority of your repayments in the early years are interest, with the principal amount increasing over time. This is the same for construction mortgages, but the structure of repayments in the initial stages can differ. Initially, you may have the option of making interest-only payments, prior to building work beginning. During the construction process, funds will generally be paid to your builder at the completion of construction milestones (such as the completion of the concrete slab, roof on, lock up) f. You should have a Fixed Price Contract with your builder, to avoid ugly surprises along the way. Having a series of drawdowns means you only pay interest on the portion of the construction loan we have paid out, rather than the whole thing. Once your house is finished, your loan will revert to a standard home loan, meaning your repayments, like most variable mortgages, will be for both the principal amount and the interest.
Is a construction mortgage the best home loan for me?
Building a home is exciting. From the very start you can create your dream home, from the green grass to the top of the roof. It is you, all you. Your vision, your creation, your hard work. Finding the right home loan to turn that dream into a reality is important, and Mortgage House’s construction mortgages could be the suitable option for you and your family. If you are starting afresh, or even renovating, construction mortgages can offer you flexibility and staged payments to make things a little easier. With a Fixed Price Contract from your builder, a construction loan will mean we make payments at various stages of the building process. We don’t pay until certain milestones have been met. And you will only pay interest on what we have paid out, not the overall loan. You will have fixed period to complete construction (generally 24 months) after the property has been settled. The first thing to remember is you will need council-approved plans and a fixed price tender before you apply for construction mortgages, and there are usually a few more limitations with construction mortgages if you are an owner-builder. Contact us if you are an owner-builder and looking for this type of loan, and we can walk you through the process.
Will I need mortgage insurance?
Mortgage insurance can be one of the hidden costs of mortgages, but do you need it? The truth is, in some cases, it can help you get into the property market sooner. Lenders Mortgage Insurance, as it is called, can help buyers with less than 20% deposit to buy a home or an investment property, but it is not a guarantee. Lenders may also require you to take out LMI, even if you have a 20% deposit. In a nutshell it protects the lender against default. If a lender thinks an investment might be too risky, they may require LMI. In the current market, mortgage insurance is not uncommon, with more than one quarter of Australian mortgages estimated to be covered by it.
How does a borrowing calculator work?
A borrowing calculator is different than a repayments calculator, in that it will give you a guide as to how much you could borrow from a lender, based on your current income and expenses, and how many dependants you have. The key with borrowing calculators is to make sure all your information is accurate. If it is, and you still fall short of what you are after, contact us and we may be able to help. However, it’s important to remember a borrowing calculator is just a guide, but it can be a great place to start.