Construction loans are designed to assist those who are building their home from scratch. 

Purchasing Land and Construction

Construction loans allow progressive draw downs. It will typically be interest-only during the building stage then revert to a standard principal and interest loan upon completion, and the amount available to borrow will be in part based on the value of the property upon completion of the construction. 

Banks and mortgage lenders usually impose strict requirements on these types of loans due to the fact that they are lending money for something that has not yet been built. 

Let's face it – in the time it takes to build a house, property prices may fall and the final house may not be worth as much as originally estimated (particularly if the builder does a poor job). 

Because of this lenders often require detailed floor plans and information on the building project. They will want to know what the house will be built of and other details which will help qualify the value of the end product. An Appraiser will consider these details along with the value of the land and compare them with other completed homes with similar features in the area. The appraisal value is then used by the lender in consideration. 

Most lenders require that a licenced builder is contracted to undertake the project. They will want to see that they have a reasonable reputation in the industry and have been in the industry for some time. The building contract will for a fixed price so that the cost of each building stage is known. Inspections will take place at the end of each stage to ensure that the contracted work has been completed and to a satisfactory standard. It is particularly difficult to obtain a construction loan as an owner builder if you will be responsible for the build and the project and have had limited experience. 

A deposit of between 20-25% is usually required for construction loans, which is substantially higher than the normal deposit. This ensures that the borrower is fully invested in the project and will not simply walk away from it. It also provides a greater buffer for the Lender if the completed project is worth less than the appraised value on completion for whatever reason. 

At TLC we apply our high service standards across all construction loan enquiries and applications. We will work on your behalf to make the whole process from pre-approval to completion as simple and as easy as possible. Our 'keep you in the loop' policy is invaluable during the construction loan process given the stages required.  

Building a house is an exciting project – we know and have utilised construction loans ourselves. We would love to work with you on your project. Call TLC on (02) 6766 6009 

Construction Loans

A construction loan is designed to assist people who are building from scratch. It allows progressive draw downs. It will typically be interest-only during the building stage then revert to a standard principal and interest loan upon completion, and the amount available to borrow will be in part based on the value of the property upon completion of the construction. 
   
A construction loan is a great way to help people build their dream home. 
   
Of course there’s a lot to do before a single clod of dirt is turned over. Before you can apply for a construction loan you must have bought your land, hired a licenced master builder, finalised building plans and have a building contract in place. 
   
The building contract needs to be a fixed price contract so the cost of each building stage is predetermined. This ensures no hidden costs are incurred during the construction process that could complicate the finance arrangements.  
   
We will make progress payments on your behalf throughout five specific stages of construction. 
   
Generally the payments will be made at slab down, frame complete, lock-up, fit-out/fixing, and completion. 
   
As the loan is being progressively drawn down interest and repayments will only be calculated on the funds used. For example if by the third progressive payment only $150,000 has been drawn down on a $300,000 loan, interest would only be charged on $150,000. 
   
The funds are paid directly to your builder. A progress inspection will be carried out by an independent valuer for each building stage, and once completed the builder will send us an invoice. They will be paid within five business days. 

Once construction is complete your loan will convert to a variable home loan. 
   
Call us today to discuss building your dream home.