When the house of your dreams is not an existing house our Home Construction Loans can help you build that dream home. At Direct Credit Home Loans Australia we have extensive experience with Home Construction Loans and good relationships with reputable builders.
Generally there is a 90% maximum lend on a construction loan and you must demonstrate 5% genuine savings or equity in a property at this level of lending.
Home construction loans are classified into three:
- Land and construction
- Land only – Must intend to build on the land in 12 months
- Construction only
What are my options for making repayments during construction?
While you have the land only, and for the duration of construction, the loan is variable rate as interest only. Interest is calculated daily and is due on the anniversary date of your loan. Once construction is complete the loan converts to a variable rate, principal and interest automatically. Remember, requests for other products can be made.
How does a construction loan work?
With a standard home loan all loan funds are advanced at settlement – by paying a purchaser, for example. Conversely, with a construction loan we will usually retain all of the cost to construct your property (this is usually the fixed price building contract amount).
Construction funds are progressively drawn down at each stage of construction. Each progress draw down is referred to as a ‘Progress Payment’.
Progress Payments are made directly to the builder. If we are only funding a portion of the cost to construct your home, you must contribute your own
funds before you can draw down the loan funds. Similarly, funds retained for construction cannot be used towards the purchase of land.