Building or renovating?
Are you gearing up to build a home or planning a major renovation? Home building loans – also known as construction loans – are designed to help you achieve your dreams.
Money released in stages as construction progresses
Only pay interest on your drawn down balance
Good for large renovations or new builds
What is a construction loan?
A construction home loan is a type of home loan designed for borrowers who are building a home or doing major renovations, as opposed to buying an established property.
Construction or building loans typically have a different loan structure to home loans designed for people buying an existing property.
A construction loan most commonly has a progressive draw-down. That is, you receive installments of the loan amount at various stages of construction, rather than receiving it all at once at the start. You generally only pay interest on the amount that is drawn down, as opposed to the total approved amount.
A number of lenders offer construction loans that are interest-only during the construction period and then revert to a standard principal and interest loan. Of course, a construction loan is just one potential source of funding for your project.
What about commercial construction?
A commercial construction loan is a type of commercial property finance that can be provided in a number of different forms.
It's important to match a construction loan with the cash flow cycle of the construction project in order to minimise the amount of equity required and maximise the project's return.
We can arrange new construction loans from as little as $150,000 for the first time commercial property builder up to sophisticated large scale commercial construction loans of $10 million or more.
Commercial Construction Loans
We are able to offer our clients the following commercial construction loans:
Construction loans against the value on completion
This type of construction loan allows funding to be applied against expected value of the project upon completion. In some circumstances this can allow up to 100% of the projects' hard costs to be financed.
Mezzanine construction loans
Mezzanine finance can support a construction loan either in conjunction with commercial property finance or as a second mortgage. Mezzanine funding reduces the equity requirement of the project freeing up cash for other projects or minimizing the amount of upfront cash required to fund the construction.
Construction loans against cost
This is the traditional commercial construction loan where lenders will advance a certain percentage of the construction cost.
Normal construction loans will fund 80% of the hard costs of construction. We also have access to lenders who recognise the other soft costs associated with construction and can extend against this total construction cost.
Different lenders will have their different requirements for each set of circumstances. Fortunately, we have over 30 lenders on our lending panel, ranging from private lenders to major domestic and international trading banks.
How do construction loans work?
There are usually five stages of construction.
These are typically known as slab, frame, lock-up, fixing and completion. As each stage is completed, your builder will issue an invoice. You simply pass the invoices to your lender and authorise them to make the progress payments from your home loan to your builder.
As each progress payment is made, you’ll only need to pay the interest on your loan balance until construction is finished. Making lower repayments during the construction period could mean you have some spare cash up your sleeve for like expenses you didn’t see coming or rent to stay somewhere else while you’re building.
When construction is complete, you can start making repayments on both the principal (loan amount) and interest, or you can continue to pay interest only for a period of up to 5 years.
Home Builder Scheme Starts Here
Speak with one of our loan specialists to find out if you are eligible.
The Federal Government's HomeBuilder Scheme gives eligible home buyers and existing owners grants of $25,000 to help them construct or substantially renovate their home.