A standard home loan makes the entire loan amount available in a single lump sum, whereas a construction loan allows borrowers to draw on the loan balance when payments to the builder are due.
How can I apply for a construction loan?
Once you’ve decided on a registered builder, your lending institution will request a collection of documentation. This comprises city plans and permits, insurance provisions, and a copy of your fixed-price contract, which includes a Progressive Payment Schedule.
Banks will approve your loan if your documentation is in order and you match the standard lending conditions. However, keep in mind that each progressive drawdown includes additional conditions.
Construction Loan Process
- Application: Similar to conventional home loans, your lender will look at your income and savings to determine your repayment capacity. Additional documents, such as a fixed-price building contract, Council-approved building drawings, a copy of your builder's license, and so on, will be required for a construction loan.
- Making progress payments: When your loan is authorized, you will receive funds in a series of installments. These will be made at various stages of the construction process, as stipulated in your building contract.
Your lender will inspect the property and want a few final documents for a final value before making the final progress payment to your builder. Once the final payment is paid, your loan will be converted to the conventional house loan or loan package that you have chosen.
FAQs
Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.
LMI is a third-party insurance premium payable by you as the borrower, to protect the lender against the potential loss of money if the borrower is unable to repay the home loan. Generally, an application with a Loan-to-Value Ratio (LVR) of 80% or more may result in the borrower having to pay Lender’s Mortgage Insurance.
Extra payment is an excellent feature of a good mortgage deal. Here, your lender lets you make lump-sum additional payments along with your regular monthly payment. Making extra payments allows you to shorten the length of time you are paying your mortgage. Since your balance is being paid off faster, you will also have fewer total payments to make, thus lowering your interest. At Reliiance Financial Solutions, we can help you find the most suitable mortgage deal for you. We have a range of lenders that allow you to make as many extra repayments as you want, whenever you want, without attracting any penalties.
Stamp Duty is a government tax imposed on contracts, with the amount usually calculated as a percentage of the contract value. In layman’s terms, it is the tax charged for your legal documents to be ‘stamped’.
If you are planning to buy a property, it’s crucial to factor your State’s Stamp Duty into your budget.Chances are, based on your circumstances and state of domicile, you might be able to obtain a stamp duty exemption, or concessions (discount) against the purchase of your first home. Stamp duty laws get changed often, so be sure to check your State Government’s website for the most up-to-date information.
Did you know that some lenders would allow you to cash out any extra repayment you made whenever you need the money? You read that right. This useful mortgage feature is called “redraw facility”. You can withdraw any extra repayments or lump sum payments you make over the life of the loan. At Reliiance Financial Solutions, we will explain all mortgage products to you, including those which allow you to the redraw option.
Testimonials
Discover how we’ve helped our clients navigate their financial journeys with personalized solutions. Read their stories of success and empowerment below.
A 5-STAR RATED FINANCIAL SOLUTIONS PROVIDER BY OUR CLIENTS
At Reliiance Financial Solutions, we have been privileged to have worked with hundreds of remarkable individuals and families.
Very few things come close to receiving their genuine appreciation of our services. All we can say in return is – the pleasure was all ours.
It is also our pleasure to share some client testimonials with you. Please click on Video Testimonials to view them all. Use the buttons at the bottom of the screen to navigate through the videos.
