If you’re ready to start building your dream home our construction loans can help you get started. Whether it’s a small extension or a complete knock-down rebuild, a construction loan allows you to draw funds from the loan progressively as your invoices arrive. This saves you money, as you only pay interest on the progress payments made until the loan is fully drawn. Unlike standard home loans, all funds are advanced at settlement with a construction loan. A lender will usually retain all of the costs to construct your property (which is the amount stated in the fixed price building contract).
Banks value established properties differently as compared to a property that is to be constructed. Adequate homework is always required before you apply for a construction loan, otherwise your valuation may come up short of the purchase price or build cost.
Construction loan funds are progressively drawn down at each stage of construction. Each progress draw-down is referred to as a Progress Payment. These payments are made directly to the builder. If the bank is only funding a portion of the cost to construct your home, you must contribute all of your own funds before you can draw down on the loan.