Construction Home Loans Home Loans

Construction Home Loans

Instead of purchasing the home of their dreams, many Australians are building it instead. If you decide to build your home from scratch, then you should look for the right construction home loans to cover the expense.

Of course, in order to take advantage of this type of loan, you will need to know all the expenses first so that what you borrow will be enough. Fortunately, home construction projects can be broken down into five basic categories which make it easier to plan for what you need.

Land Purchase: You can purchase land for far less than buying a home. However, it will need to be properly prepared in order for you to build a house.

Foundation: Most homes will have a poured concrete foundation which will prevent the home from sinking into the earth. Once you have your foundation, the flooring is next in which you will need bearers and joists if your floor is going to be made from wood.

Walls & Roof: This will complete your home construction in terms of the basics as this will include the frames as well.

Lock Up: This is where your electricity and water services are attached to the home.

Final: Here, you will paint and furnish your new house and complete any other needed construction.

Most construction loans allow you to separate your withdrawals into five sections which will mimic the construction phase of building your home. As each phase of the construction project approaches, you can take out what is needed to complete the task.

The good news is that your repayments are only for what you draw out of the loan itself and not the totality before it is used. Upon completion, construction home loans will then revert to another type of loan that has been decided by you or your lender.

How Construction Home Loans Work

You will need to start by calculating the amount needed for the purchase of the land and construction of your home. Once completed, you can then approach a lender for what you need and the negotiations will begin.

Generally speaking, lenders will loan out about 65% of the land value for the purchase of the property. However, there are lenders who may loan out up to 95%, so you will want to review all of your options before choosing a lender.

For the next step in the process, the lender will ask to see a council approved plan for the home construction and contract. This means that the company which is building your home will need to provide the appropriate information to the lender before the loan is approved.

Each phase of the construction project will be evaluated for completion before the next step in the loan process is unlocked. In general, construction home loans are very friendly towards the project coming in under budget because that money is then never pulled from the totality of the loan. For Australian families, lowering the amount borrowed on a loan means having their home constructed with less to pay back. 

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