Construction Loans | Mortgage Choice in Kingsley

Building a brand new home, or making major renovations on an existing home are exciting projects to undertake as home owners. If you’re planning to build or give your existing property a major face lift, it may be worth considering a construction loan.

What are construction loans?

Construction loans are different from regular home loans, due to building works requiring ongoing payments as the construction progresses. In the case of a traditional home loan, the totality of funds will be made available in a single lump sum, while a construction loan lets borrowers draw on the loan balance when payments need to be made to the builder. These payments are made at key stages of the building process and are known as progress payments.

While work is still in progress, you will only be asked to make interest repayments on money that has been drawn down. This means you will only be paying interest on money that has been used. Therefore, repayments will be smaller at the start of your loan and will increase gradually as your construction project approaches completion.

In general, construction home loans have a variable rate, with a maximum Loan to Value Ratio (LVR) of 95%. This varies depending on lenders, therefore it is something worth speaking to our brokers Michelle or Tim about. Lenders also often set a maximum timeframe for the complete draw down of your loan, usually around 6 months. If you are not planning to start building right away, you may need to purchase the land on a separate land loan.

This all may sound confusing, but that's where Michelle Clark and Tim Kerin, the home loan experts at Mortgage Choice in Kingsley, are here to help you! To get expert home loan advice at no cost to you, call or text 0488 839 212 or book using the button below. 

 

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