Are you looking to construct a new investment property or maybe you want to add to your family home? Chances are you will be looking at acquiring a construction loan to help with the finances.
Construction loans are value added loans where any proceeds can be put towards your building work. Compared to buying an existing property where you may be looking at a mortgage, constructions loans are different and can be designed to suit you and your circumstances. The benefits of having a construction loan are numerous and many individuals will find that – with rising house prices – the cheaper alternative is to add to their existing property or construct a new one on the same land.
The major difference between construction loans and mortgages is the number of people involved. In the process of building a home or adding a major extension, you will probably be using or consulting multiple parties which could include: contractors, solicitors, surveyors and the actual builders. The chance for something to be missed or not communicated correctly between each individual is high and because of this, construction loans tend to be quite complicated.
The other difference to consider is whether you are looking for a loan as an investor or an owner occupier as this could change who you borrow from, how much you borrow, the interest rate and monthly repayments.
When you initially apply for a building or construction loan, you will need to submit a copy of a building contract and the plans for the property. We will arrange a valuation of the property to determine the estimated future value once construction is completed. The lending process is also different to applying for a regular mortgage and may not result in a lump sum being transferred to you but instead, a set of periodic payments based on the completion of different construction stages.