News

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

14 January 2021

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:

Slab

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

Frame

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

Lockup

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.

Completion

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.

Latest

Buyers were out and about in force at the weekend in Melbourne, looking to splash the cash and secure a property early in the year in a buzzing auction scene.

Read more

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

Read more

The dire situation with COVID-19 in places like the USA and UK is seeing Australian expats keen to get out and return home throwing big offers on luxury property without even seeing them.

Read more

Landlords in Melbourne can’t get tenants right now while those in the regions can’t keep up with demand in this crazy COVID year.

Read more