What Is Payment in Construction?
Construction loans last as long as the construction project. Once the crew completes the project, the owner-builder or investor must repay the loan in full. Thus, it’s a short-term solution. In addition, the payments work differently than a residential mortgage too. Payment in construction projects takes place in increments.
Only 10% of construction projects fall through in Australia. The rest reach completion but might experience delays. Since construction projects pose a high risk to lenders, they split up the payment into disbursements. Lenders divide the projects into five stages. Once the construction team reaches each milestone, the borrower submits the appropriate paperwork. Lenders assess the milestone request. If everything meets the requirements, lenders process the disbursement in five to 10 days.
In addition, lenders divide the total loan into disbursements based on percentages. For example, when the crew completes the roof, they receive between 24% to 35% of the project’s total payment. Loan specialists set down the exact terms during the application processing stage. They can also discuss the loan term and repayment.
Mortgage House is a non-bank lender that works with owner-builders and investors. We fund construction projects among other ventures. For example, Mortgage House clients receive access to other loan products including consolidation and our business loan.
Payment in Construction Conclusion
To further understand payment in construction projects, contact our Mortgage House loan specialists. They can outline their time and the requirements for the loan. Plus, our loan specialists can discuss what to expect during the construction project on a financial basis.