Finding a Loan - To build a Home

Congratulations on deciding to build your home. There are many reasons why people choose to build a home. The ability to build a dream from start to finish, the stamp duty savings etc.

When you decide that you want to build, Konnect Financial Services will be right there with you as we have personally experienced the joys of finding the right block of land, choosing the right design and making sure you don’t forget anything.

We work with your selected real estate agent and builder to ensure that your finances have been pre-arranged for both land and construction. We will discuss with you what to expect and what is required from you in the process of building a home.

When building a new home, or if you’re planning major renovations to your existing home, a construction loan is generally the most appropriate funding option.

The difference between a construction loan and a standard home loan is that instead of a lump sum payment at settlement, the loan is usually drawn down in stages. Payments (or draw downs) coincide with the initial purchase of the land followed by a number of key construction stages. So therefore you aren’t paying the full required payment until your home is completed.

For instance, if you have borrowed $300,000 for a house and land package, but have only drawn down $140,000 to pay for the land, you only pay interest on the $140,000 not the full $300,000. This type of loan is ideal for building, as you only pay interest on the amount you draw down.

The Building Process

Before the builder starts, you will need to have paid a deposit to the builder as well as paid a deposit for the land if you are buying land at the same time. Progress payments are usually broken up and paid in 5 stages:

1. Base Stage

2. Frame Stage

3. Lock-up Stage

4. Fixing Stage

5. Completion Stage

As work progresses you will need to make these stage payments to the builder. Depending on your loan structure progress payments can be paid directly by your bank on the presentation of a new invoice. An alternative loan structure can be used whereby you use a Line of Credit to fund the construction stages.

If you are building an investment or require development finance we are here to help.