What not to do when Building A New Home with a Small Deposit?
In terms of homeownership, building a new home is as exciting as becoming a homeowner. If you agree to a small deposit construction loan, you must exercise caution. The construction process isn’t perfect. It involves several moving parts that no one person has control over.
Those interested in building a new home with a contractor must give the contractor a deposit, too. It’s important to procure financing before reaching an agreement with a contractor. If your financing falls through, your contractor won’t return the deposit. Check the agreement and read through the deposit information carefully. There might be a non-refundable clause.
Construction loans with a small deposit require a guarantor. With a guarantor and a small deposit, you might receive 100% of the project’s value. If the project falls through, the lender might not return the deposit. Before signing contract documents, read the deposit information. Find out if the deposit is refundable in case the project isn’t realised.
If the financing goes through and the contractor is ready to go, the lender pays the contractor directly. These disbursements are known as contractor drawdowns. The contractor is asked to provide an invoice, and your job is to ensure that the lender receives the paperwork.
Building a New Home Conclusion
For more information about building a new home with a small deposit, contact Mortgage House. We’ll take a look at your goals and current financial circumstances. If you only have a small deposit available, we take a look at ways to maximise the financing and current home loan rates.