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