Constructing a new home can be a great way to maximise the returns on a property you own, or capture the upside on a vacant block of land you have bought. Having said that, building a new home has its complications, and our goal is to make the process as simple and hassle free as possible. We can also help you substantially renovate your home, where you need to finance structural renovations like knocking down walls or extending your home.
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A construction loan is one set up for the purpose of building a new home or substantially renovating an existing home where structural renovations are required. A construction loan is drawn down in stages called progress payments.
A progress payment refers to each payment made to your builder according to a fixed price building contract. This means your loan is funded in stages.
If you are building a new home on a newly purchased site, you will need to purchase and finance the land first. This means there are two loan applications, one for the land and another for the construction once you have the relevant paperwork ready.
No, you cannot use seperate banks to finance a land loan and then a construction loan. The only way you can do this is if you borrow against another property to 100% finance the land OR 100% finance the construction.
Yes, you can use a construction loan to finance and build an investment property. We have many clients who opt for this strategy to save on stamp duty, and attempt to capture a capital gain by taking on the risk of the construction process.
Normal lending policy applies for construction LVR’s. This means the standard is 80% LVR, and above this, Lenders Mortgage Insurance (LMI) will apply.
