If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed or, subject to negotiation, this interest only term can be continued. A construction loan allows you to draw money as is required whilst building. Further, along with the usual necessary documents that are required when applying for a loan, construction loans also require a “fixed-price building contract” and “council approved plans”.
Construction Loans
Advantages & disadvantages
Advantages
- Competitive variable interest rates.
- Facility to draw money when necessary whilst building.
- Interest only payments during the building period.
- Additional payments can be made.
- You only pay interest as the loan is progressively drawn down
Disadvantages
- Requires a fixed price building contract leaving little room for change whilst building.
- Some lenders charge a fee for every time you draw money through the building period.
- Given it is a variable loan; loan repayments will increase if interest rates go up.
To do's
- Contact us to discuss your initial thoughts and requirements.
- Complete our finance application form covering the purpose for seeking credit and the amounts of credit sought
- We will then contact you to arrange an initial consultation, to agree the basic information required and the process for completing such
- Once that has been compiled we will review it and then provide a written strategy for you to consider.
- If you’d like to proceed, we will then work with you on a formal loan application process.
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