K R Consulting

Construction Loans

Construction loans are really another form of a standard home loan which rolls out in stages as the different phases of your land purchase and house construction unfold.  While you can readily get a loan for land purchase alone, if you are buying land with a view to construction and require funds for the land purchase, KRC will try to set up the entire approval process for you from the outset. Your borrowing options are pretty broad and your choices will naturally be driven by your personal situation.

There are typically five loan stages

  1. Pre approval for your land and/or house purchase
  2. Land purchase and formal approval for your land settlement
  3. Formal loan approval for the construction portion of your loan
  4. Construction commencement and loan drawdown in stages
  5. Construction completion and switch to Principal and Interest home loan (if applicable)

Pre-approval

Your mortgage consultant at KRC after assessing your personal situation in detail will recommend a financier and a suitable home loan product. The final decision about which lender you go with is completely up to you and once made, your mortgage consultant will cover what you need to do in order to get through the process successfully. They will prepare your home loan application with you and along with your supporting documentation, submit it to your chosen financier for a conditional approval. When conditional approval is received, you can go ahead and sign your house or house and land contracts with confidence.

Land Purchase

Most lenders will require a commitment to a timeframe within which construction will commence if you seek funding to assist with the purchase of land alone.  This timeframe can be as long as five years.

Construction Loan Approval

Allowed construction periods generally are not longer than two years. For construction approval, you will be required to present:

  • Your fixed-price building contract with a licensed builder, including proof of builder's insurance, current for the construction period. (If you are an owner builder, you will be required to present detailed costings including quotes and all relevant insurances)
  • Your council approved plans and specifications of the proposed residence

Construction loans require a level of flexibility and are therefore usually variable rate loans and typically interest only.

Progress Payments

Once progress payments commence, your financier will most probably require inspections at each payment release point.  Your building contract should nominate the number of progress payments for the construction, but there are typically four (slab or floor, framework, lock up and completion).

During the construction period, you would typically make repayments monthly on an interest-only basis.

Construction Completion loan switch

Once construction is complete, you will then finalise how you want to repay your loan. You might then switch to a principal and interest loan and choose to repay your loan in monthly, fortnightly or weekly installments.

The home loan market is very competitive. There are literally thousands of home loan options to choose from and the fastest way to get to the best decision for you is to get assistance. So, please call us at any time on1300 79 63 69 or click on the Make an Obligation Free Enquiry link below and one of our experienced consultants will be in touch with you within 24hours.