Construction loans all the rage as Australians cash in on grants and low rates


Building a new home is all rage in Australia right now while government grants and record low interest rates provide fertile ground.

But getting a loan for a new house build can be a more complex affair that is helped along by solid research and preparation.

Construction loans are designed for these new homes or major renovations and cover all the expenses of the construction.

These loans are actually different and more complicated than a standard home loan. For a start, it is hard to assess the value of the property because it is not built yet and this can attract a higher interest rate as a result.

While the house is being built, interest-only payments are usually charged, that revert to principal and interest thereafter for the duration of the mortgage term.

Construction loans are also broken down into stages called progressive drawdown and generally follow the pattern below:


The first drawdown covers the cost of laying the foundation of the property.


This funding covers the cost of framing the property, which includes windows, roofing and partial brickwork.


The processes needed to be completed that allow the property to be ‘locked up’, so includes external walls, insulation, windows and doors.

Fitout or fixing

Here the lender pays for the installation of internal fittings and fixtures.


This stage of financing covers the finishing touches like painting, polishing, fences and cleaning.

If you want to apply for a construction loan you are subject to the normal lending criteria but will likely need to supply the additional documents of a building contract, building plan and quotations that show the expected expenses of additional features in the property.

Call Perry Finance now to get expert advice if you’re thinking about embarking on a construction loan today.


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