Mortgage Loans
Construction Home Loan
Construction Home Loans
Want to Build Your Ideal Home?
Finding the right place for you can be difficult as people’s tastes are unique, and there is limited housing stock in the area you want to live in.
Building your home or renovating a home could be the right solution for you, as you will get precisely what you want in your new home.
Construction home loans are designed specifically to assist people choosing to build or do major renovations in their own homes. The main difference between a construction loan and a conventional home loan is construction home loans are paid, in stages, directly to the builder.
There are different loan options depending upon whether you :
- own the land you plan to build on,
- wish to buy land and build later, or
- plan to purchase a house and land package.
How we can help you?
We Have Over 40 Lenders Which Can Offer You The Best Construction Home Loan Deal
The payment stages in a construction home loan
The critical difference between a construction home loan and a conventional home loan is construction loans are paid in stages directly to the builder. At no stage does the person taking out the loan receive any money.
The loan is paid directly to the builder in increments known as progress payments. Typical increments are as follows:
- 5% deposit is paid and another
- approximately 20% of the purchase price for each completed stage (see the stages below).
Therefore, a construction loan only extends until construction is completed. Upon building completion, the construction loan will revert to a variable loan. During construction, you generally only pay interest on the amount drawn down instead of the whole loan amount.
The typical payment stages are:
1. Foundation
The concrete slab/foundations are laid and ready for construction to commence. In some states, this means the site has been prepared, and stilts or stumps are installed for a raised home, such as a Queenslander or a house built in a cyclone-prone area.
2. Frame
The building of the frame is completed. Frames typically use wood or steel (or a combination of the two) for the main structural support beams and roof. The frame stage includes frames for items such as recessed mirrors and bay windows.
3. Lockup
By the lockup stage, most of the external framework is complete (i.e., walls, verandas, and staircases), and the home can be locked to prevent unauthorised access. Exterior cladding is complete, heating and cooling ducts are installed, the garage frame and roof are completed. The bathroom and kitchen plumbing are in place.
4. First Fixing
During this stage, the home is fitted out internally, with the installation of internal walls, doors and window frames. Next, electric wiring and gas piping is laid before the flooring is installed. Finally, waterproofing for wet areas and plastering are finished.
5. Completion
The completion stage is also known as ‘fit-off.’ During this stage tradespeople such as electricians install light switches, power points and fluorescent lighting. Next, the plumbers connect sinks, taps, showers, bathtubs, and bathroom accessories. Finally, plastering and painting are finished, and floor coverings such as carpets or floorboards are installed. By the end of this stage, your new home is complete and ready for handover. Once the last stage payment has been made to the builder, you will receive the keys to your new home.