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Loans for construction are designed to be used by people who are building their own homes rather than buying one.
Construction expenses are covered by a construction loan, not a regular mortgage.
Construction loans are structured completely differently from traditional mortgages. Your construction loan is divided into stages according to where you are in the building process.
Progressive drawdowns are sometimes called progress payments. A deposit will still be required.
Building a new home or undergoing a major renovation is more appropriate for a Construction loan Sydney. A typical home loan may not be appropriate otherwise.
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How does the construction loan process work?
Construction loans are very different from home loans. Repayments during construction are usually interest-only.
You pay very little during construction due to the interest-only period, then you convert to a principal and interest mortgage after construction.
Following approval of your construction loan, your lender will make payments to your builder during construction. Furthermore, the builder will outline how much is needed for the construction of your home in addition to dividing the expected costs into segments.
If you are dealing with a progressive lender, your progressive drawdown process typically looks like this:
Do you have the option of using your home equity for a construction loan?111
You can finance your construction loan with the equity in an existing property. If you have enough equity to meet the construction loan’s deposit requirements (usually at least 20%, sometimes more), you can get a construction loan.
How much equity do you have in your land?
Although a vacant piece of land cannot increase in value like a home, you can still use the equity you have in it to fund a construction loan. It will be a matter for your lender to determine whether it can be used for a building on the same property.
Construction loans are different from vacant land loans if you’re only planning on buying vacant land. You will have a set timeframe for constructing a home on the land when you take out construction loans.
The approval process for construction loans
Step 1: Apply
Use our online booking form to arrange a call with a lender or to submit an application at loans.com.au
The second step is to speak with a lender
Speak with a lending manager. The loan officer will work with you to choose the right loan for your needs, determine how much you can afford to repay, and arrange for a conditional approval. If you haven’t filled out an application yet, our lender will do so during our conversation.
Upload your documents in step 3
You upload your supporting loan documents to onTrack, our simple online portal and synchronized mobile app. From the moment you contact us through settlement and registration for online services, you can use OnTrack to complete your entire home loan application on your mobile device or computer.
The following items are needed:
- Payslips 2 and 3
- Statements for the last three months of your salary account
- Please provide evidence that you have deposited your deposit
- An acknowledgement of ownership (or a contract for sale) of the property
- An agreement from a registered builder that includes a fixed price
Your builder will be contacted and a property valuation will be arranged.
Approval of the final report is the fourth step
During this Stage, you will receive the following through onTrack:
- Your loan has been approved in its final form
- Documents and Loan Agreements related to your mortgage.
