Solutions for all sizes of construction

The Construction Loan is a loan that is drawn down in stages as your property is being built. This means that your monthly mortgage repayments slowly increase as the construction moves forward until finally at completion of construction the loan repayment reaches its full monthly repayment amount.

In a construction loan your builder is usually paid in drawdowns (sometimes also known as progress payments) which occurs when part of the work is completed. Builders will usually send you a progress invoice each time a progress payment is due. Your lender may also require you to sign a progress payment form that they will provide. You would need to send this form to the Lender along with the progress invoice. Once the progress payment is approved by the lender, the builder will be paid from your loan account.

You may decide that you have the skills and resources to either build your home yourself or manage the process, this is called an Owner Builder. Whilst there are the obvious advantages of saving money and building the house exactly to your specifications, there are some things you need to take into consideration before you proceed down this path. Most lenders will; require you to have building experience, substantially reduce your LVR and require you to pay for costs prior to being reimbursed.

Generally speaking the bank will instruct the valuer to review the value of the land,(either from the Contract of Sale or from their own valuation if you already own the property) and the cost of building the house from the construction contract and specification. They will then assess it in comparison with the value of other similar houses in the area. The result will either be the cost of the land plus the value of the improvements or the valuation amount in comparison to other properties in the area, whichever is the lowest.