Construction Loans
A step by step guide on how to get construction finance
We’ve often said that building a home is a time of mixed emotion with customers experiencing great excitement and nervous anticipation. There are many things to consider and where the construction involves finance there are a few extra tasks you need to tick off before securing the loan and locking in a successful build. So, in today’s blog we’re going to explore some key steps towards securing construction finance.
The construction finance market is a crowded place with many banks, building societies, credit unions and smaller lenders offering different rates, products and most notably construction conditions before you secure a loan, and it’s important to note not every lender offers construction finance. It can be a confusing process, so Highfields Builder recommends undertaking some research to ensure the loan will meet your present construction needs and general home loan needs into the foreseeable future.
Let’s break this loan process down a bit more
- Knowing your borrowing capacity (considering income, expenses, and personal circumstances) is an important step before finalising building plans and committing to a construction project.
- We recommend making an appointment with your bank or Mortgage Broker to work out your borrowing capacity and map out a viable plan towards a successful home construction. You’ll generally be expected to take along evidence of income, deposit, debts, and other expenses. In the case of a construction loan, you’ll need the formal quotation, preliminary plans and home specifications.
- The bank or Broker will research, and present loan options based on your borrowing capacity, personal preferences, product availability, interest rates and any special offers that may exist from time to time. If you’re using the services of a qualified broker, they may present loan options from multiple banks and lenders.
- Government Incentives – First Home Buyers (Qld and elsewhere) may be eligible for incentives and fee discounts when purchasing vacant land and constructing a home. (Eligibility criteria applies.) Exploring these incentives is highly recommended and may save you thousands!
- The Loan Officer or Broker will prepare the lending application and submit it for credit assessment. The lender will assess and hopefully approve your loan for the proposed project. There may be conditions attached to the approval so it’s important to review those in consultation with your lender and solicitor if required. Once you’ve reviewed and signed the construction contract with Highfields Builder, you’ll need to provide a full copy to the lender. You’ll also need to provide Highfields Builder with a copy of your formal loan approval.
- Following the lending approval, the lender will issue loan contracts for signing. Your bank or finance professional can clarify any general questions relating to the loan product and features, and Highfields Builder recommends seeking professional legal advice regarding the loan contract and its associated conditions.
- With the signing and return of the loan contract the project then moves into the settlement and funding stage. Building contracts generally specify a few progress payments. An example may include a deposit amount, followed by further payments at slab, frame, lock-up and finishing stages. As each stage is completed Highfields Builder will send you a formal invoice for submission to the lender for payment. Lenders generally require the customer to exhaust their own deposit funds before drawing down on the loan.
This article has focused on the construction aspect of lending. Finance relating to land purchases is the subject of another blog. At the time of making contact with Highfields Builder, you may have already purchased vacant land or be planning to do so. Highfields Builder construct homes on customers land and also offer a range of land options to purchase.
Highfields Builder is your local home building specialist in the Toowoomba region
Scott, Bonni and the Highfields Builder team are focused on building strong relationships with customers and delivering outcomes that exceed expectations. The process of building a home can be complex and every customers situation is different. When you build with Highfields Builder you become part of a team committed to delivering the highest standards of excellence in residential home construction, from enquiry through to handover.
DISCLAIMER
This article may include information on home building, real estate, home finance and legal related issues in a general way. It is intended for general information purposes only and should not be regarded as legal advice. Highfields Builder Pty Ltd recommends that professional legal and financial advice should be obtained before taking any action on the basis of the general information presented in this publication.
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