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Construction or building loans are ideal

Construction or building loans are ideal if you are building a new home or planning a major renovation to your existing home. So whether you are based in Sydney, Melbourne, Brisbane, Perth or anywhere else in Australia, we will source the appropriate construction finance or owner builder finance to assist you in realising your dream home.

A construction loan is very specific to those who want to build a new home and sign a building contract with a licenced builder. The lender will determine the total amount you will need in order to pay your builder and then break it down into separate payments, called progress draws. These progress draws are the amounts paid to your builder throughout the construction stages. While these draws are being made, most lenders will only expect you to pay the interest due on them. Your full principal and interest payments won’t start until after the handover and when you recieve the keys to your new home.

Construction home loan and a standard home loan

The difference between a construction home loan and a standard home loan is that instead of a lump sum payment at agreement sign-off, the loan is usually drawn down in stages for a construction loan. Payments, or draw downs, coincide with the initial purchase of the land, followed by a number of key construction stages. When the construction loan is fully drawn down and the property is complete, it usually reverts to a standard home loan as agreed with the mortgage lender.

Construction loans are ideal for building

Construction loans are ideal for building, as you only pay interest on the amount you draw down. For instance, if you have borrowed $300,000 for a house and land package, but you have only drawn down $150,000 to pay for the land, you only pay interest on the $150,000 and not the full amount.

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Payment control

The mortgage lender will use a valuer to assess the land and proposed construction. The mortgage lender also monitors the construction process and only makes progress payments when the builder has reached certain objectives and met satisfactory standards. You will need to provide invoices to the mortgage lender who controls payments to the builder.

The construction stages

1. Foundations/footings
2. Frame and brickwork
3. Lock up
4. Second Fix
5. Practical completion

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Against these stages will be a percentage of the overall payment that will need to be paid at that stage.

For more information about construction loans, please speak to one of the mortgage brokers at Intellichoice about sourcing the most appropriate owner builder finance or construction loan to assist you in the construction of your new home. Call us on 1300 55 10 45.

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The only broker in Australia who offers owner builder finance of its kind. Get your home loan now.

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The only broker in Australia who offers owner builder finance of its kind. Get your home loan now.

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The only broker in Australia who offers owner builder finance of its kind. Get your home loan now.

The only broker in Australia who offers owner builder finance of its kind. Get your home loan now.

Videos for Owner Builders

You should seek pre approval before entering into an owner builder arrangement. The reason is simple, building is a complex excerise requiring good co ordination and technical skills.

Articles for Owner Builders

Lenders are aware of the complexity owner builders face, and the possibility of costs over runs. This comes primarily from in-experience with managing this type of project. Hence most lenders are not generous when it comes to lending at high LVR’s on an owner builder loan.

Frequently asked questions

Why utilize or use an owner-builder expert?

Utilize an owner-builder loan broker that has a particular expertise. We know which moneylenders can help you compare different options between them and normal construction loans that can enable you to make choices.
We can likewise show your application in an ideal way to the loan specialist with the goal that the banks/lenders see your application in the most appealing way that is available. We can likewise manage you all through the entire procedure and make it as smooth as would be prudent.

How does owner-builder loan work?

In case you’re endorsed for an owner-builder loan, the loan specialist will discharge the assets to you as advance installments as opposed to in a singular amount as it would with a standard mortgage/ loan. As you finish each phase of development, a valuer will evaluate the work and after that approve the loan specialist to give next advance installment

How to maximize your chances of being approved?

It is safe to look for pre-approval before entering an owner builder arrangement. Pre-approval will give you a thought of what your maximum loan will be, which can enable you to decide whether or not its the correct choice for you.

How much can I borrow?

If you are an owner builder without any prior experience in building the amount you can borrow will range only from 50% to 70% of the total construction cost. You can get a bigger loan if you are a licensed builder or have the supervision of license builder. Generally, a licensed builder can get approved for up to 80% of the total construction cost.

How to apply for owner builder loans?

We’ll ask for certain documents for owner builder loans to be approved. These are the following: Builder’s permit, budget and its proposed breakdown, project plan, copy of your builder’s insurance, and a clear construction cost estimate.

How Do Banks Fund Owner-Builder Loans?

Banks will only release funds when they see works completed on the build. This means that it’s essentials to have funds available to help fund the project, to purchase materials as they are needed, for instance. For this reason, our recommendation is always to maintain a good level of working cash to cover building works and contingencies.

Why is it so difficult to qualify for a loan?

A few lenders are concerned about lending to owner-builders because of the chance that you can pass over finances or no longer complete the build. However, if you’re a licensed and skilled builder, you’ll be seen as a less risky borrower.

How is Owner Builder Finance different to regular Construction Finance?

The process for Owner Building is different to that a contract builder would utilize when building a house. For instance, Contract Builders don’t have to pay their accounts immediately so they have flexibility in their payment structure. An Owner Builder does not have that luxury. As an Owner Builder, you will regularly need to pay large deposits on your materials and the balance on delivery.

Owner Builders spend half of the cost of their entire project within the first quarter of the building project’s time frame. The huge construction costs are toward the start of the project, so you need a tailored Owner Builder Loan to make life easier.

About Us

Our mortgage broking is second to none. Don’t waste your time and money running around from bank to bank, sifting through ambiguous loan offers only to find they don’t work. Take advantage of our expertise and let us find the right loan or finance to suit YOUR needs.