Construction Loans in Sydney
How To Get Construction Loans in Sydney?
Construction loans in Sydney, also known as owner builder loans, are different from regular home loans, due to building works requiring ongoing payments as the construction progresses. In the case of a traditional home loan, the totality of funds will be made available in a single lump sum, while a construction loan lets borrowers draw on the loan balance when payments need to be made to the builder. These payments are made at key stages of the building process and are known as progress payments. While work is still in progress, you will only be asked to make interest repayments on money that has been drawn down. This means you will only be paying interest on money that has been used. Therefore, repayments will be smaller at the start of your loan and will increase gradually as your construction project approaches completion. In general, construction home loans have a variable rate, with a maximum Loan to Value Ratio (LVR) of 95%. This varies depending on lenders, therefore it is something worth speaking to your mortgage broker about. Lenders also often set a maximum timeframe for the complete drawdown of your loan, usually around 6 months. If you are not planning to start building right away, you may need to purchase the land on a separate land loan
The construction loans Sydney process
- Application
Boost your chances of approval by knowing what’s required. Much like traditional home loans, your lender will have a look at your income and savings, to judge your capacity of repayment. However, additional documents will be needed for a construction loan, such as a fixed-price building contract, building plans approved by the Council, a copy of your builder’s license, etc.
- Making progress payments
Once your loan is approved, funds will be provided in a series of payments. These will be made at various milestones of the building process, outlined in your building contract. The six stages of construction are typically the preparation, followed by the slab (or base floor), frame, lock-up, fit-out, and finally, completion.
- Home is complete
Before making the last progress payment to your builder, your lender will inspect the property and need a few last documents for a final valuation. Once the final payment is made, your loan will switch to the standard home loan or loan package that you have agreed upon.
- You are now free to move in!
Celebrate with friends and family, and make a fresh start in your brand-new home!. Growing through New Construction Loans The significant difference between new construction loans and normal loans is that you only pay interest payments on the loan amount drawn down as you progress through the construction process. If you pay cash for your land and then arrange a construction contract with your builder, they will ask for a progress payment upon the completion of a specific stage of the project. This invoice is sent to the lender and they will pay the builder. The lender will then send you an interest payment request. Various construction loans include house and land packages where the land loan is drawn and progress payments are made on construction. Some of these packages only require full payment upon completion, which can save thousands, as the builder incurs the interest cost on the construction. For construction, a loan made the easy call on 040 380 3470 or email us now.
