December 06, 2017
Construction Loans what to know
When you looking to buy land and build a home there are a number of things you need to take into account. It can be difficult finding out which lenders provide the right loans for building your dream home (and there’s even lenders that won’t lend at all) which is why talking with a mortgage broker could save you valuable time and money.
Buying the land
Because you’ll need the land before you start building your dream home it’s important to make sure you go through all the processes in the right order. Often, the purchase of the land can settle before the building contract is available. We recommend getting a pre-approval (you can read about them here) for the land and construction before you get started on the loan application so that you don’t need to amend the application for the land purchase. Call me today on 03 5331 3632 to get your pre-approval sorted now!
When you are hunting for that dream piece of land, you should always request a soil test first, or, when making the offer for the land ensure that it is set to be subject to finance and soil test. This is important as it protects you from being responsible for the whole cost of the land in the unfortunate event you don’t get the finance or a poor soil test result.
When borrowing money to buy your dream home, lenders will require that you have concrete building contracts. We can help you collate and organise all of the following items that are required by the lender:
• Construction Price
• Progress Payments Schedule
• Plans and Specifications
• Address of Construction and Clients
• Signatures of Clients and Builder
As your brokers, we’ll make sure you’ve got all the correct information and forms ready for your home loan application so you’ve got the best chance of getting your loan approved for your dream home.
Insurances and grants
Because building a home does have some risks involved, before building can begin the lenders will require 2 Insurances to be provided, Public Liability and Builders Construction.
If you are First Home Buyer and are applying for the First Home Owners Grant of $20,000 then the relevant paperwork must also be prepared and provided to the lender (FHOG application form) along with the loan application. We can provide you with all of the necessary forms and let you know if you qualify for the grants to help you out with your home purchase. We can also talk you through any stamp duty exemptions so call us today.
It is also important to know that you do not receive the First Home Owners Grant until the build commences.
Once the land has been purchased and the land loan has settled with your lender the build work begins. The lender you have chosen will make the funds available to you so that you are then able to draw progressively during building works.
Progress payments are made from this account in the following order:-
• Slab Stage
• Frame Stage
• Lock Up Stage
• Fix Stage
• Final Stage
When the final invoice is submitted to the lender you will also need a copy of the Occupancy Permit, which means the home has been completed to the Contract requirements, and you will be in a position to move into your New Home.
If you’re thinking of building your dream home get started on the right foot by giving us a call today on 03 5331 3632. We can chat you through every step of the process an ensure you’re getting the right loan for your needs.