February 15, 2018
Candice Le Marchant
Building your first home or building for the first time can be a confusing and daunting process for many people. In this blog, Lauren Murphy, our experienced Mortgage Broker at Mortgage Choice Raymond Terrace, outlines some key questions that are often asked by clients.
How is a Construction Loan different from a "Normal Loan”?
Building works call for a steady "drip feed" of funds to meet ongoing costs as construction work progresses. Unlike a traditional mortgage where the funds are made available to borrowers in a single lump sum, a construction loan lets you draw on the loan balance when payments need to be made to your builder at key stages. These payments are known as progress payments.
What repayments will need to be made during construction?
While work is still progressing, you will only be asked to make interest repayments on the money that has been drawn down. So, at the start of your loan you can expect small repayments, and these will gradually increase as your building project nears completion.
This means that you aren't paying interest on money you have not used as you would with a traditional home loan, and with a construction loan the repayments will be far lower until your project is complete.
What deposit is needed?
Construction loans normally have a variable rate and in general you can expect a maximum Loan to Valuation ratio ("LVR" - the maximum proportion of the property's value you can borrow) of 95% which means you will need genuine savings of a minimum of 5% of your loan amount.
If you are considering building this is something worth speaking to us about as the situation varies widely between lenders.
At Mortgage Choice Raymond Terrace, we have assisted many satisfied clients through the construction phase of their loan. Let us support you through the finance process so you can enjoy this exciting time in your life. Call us today and let us do all the work for you. It is as easy as contacting Lauren Murphy on 0408 480 562 or email firstname.lastname@example.org.
Alternatively, you can call in and see us at 2/199 Adelaide Street, Raymond Terrace. We service the entire New South Wales Hunter Valley and Port Stephens regions – and can meet with you at a time and place that suits you.