Construction Loan



Ever dreamt of crafting your perfect home, brick by brick? While exciting, financing the construction can feel like navigating a maze. But fear not, future homeowner! Enter the construction loan, your trusty guide on the path to realizing your vision.

What is a Construction Loan?

Unlike traditional home loans that provide a lump sum upfront, construction loans release funds in stages as your dream home takes shape. Think of it as paying for each completed chapter of your building journey. This ensures the builder receives funds only when specific milestones are reached, protecting both you and your investment.

Key Features:

  • Progress Payments: Funds are disbursed at pre-determined stages (e.g., foundation complete, framing finished), based on invoices from your builder and approved by a valuer.

  • Interest-only Period: During construction, you typically only pay interest on the drawn funds, minimizing financial pressure while your home gets built.

  • Draw Schedule: This outlines the disbursement amounts and timing, ensuring everything flows smoothly.

  • Loan Term: Covers the construction period and your chosen repayment term (e.g., 30 years).

Unlocking the Benefits:

  • Flexibility: Pay only for completed work, reducing financial risk.

  • Manageable Payments: Interest-only payments ease the burden during construction.

  • Peace of Mind: Funds are released responsibly, ensuring transparency and security.

  • Tailored Solution: The loan adapts to your unique build schedule and budget.

Things to Consider:

  • Costs: Factor in builder fees, progress inspections, and potential cost overruns.

  • Drawdowns: Mismanaging disbursements can delay construction, so plan carefully.

  • Repayment Transition: After construction, the loan switches to traditional P&I payments, be prepared for the increased amount.

  • Expertise: Consider working with a mortgage broker specializing in construction loans.

Building Your Knowledge:

Before embarking on this exciting journey, equip yourself with the right knowledge:

  • Research: Understand construction costs in your area and potential financing options.

  • Choose a Builder: Select a reputable and licensed builder with experience in your desired project type.

  • Get Quotes: Compare construction and loan costs from different providers.

  • Seek Guidance: A mortgage broker can explain the intricacies of construction loans and guide you through the process.

Feel free to contact us if you need assistance. We are happy to serve!