Once your house plans are settled, you have chosen your Builder, made your selections and had your house plans approved by the relevant authorities you will finally be just about ready to commence construction. But of course before work can start you’ll need to have your finances finalised. If you are fortunate enough to be able to not use Lender finance then great all you need to do is come to terms with your Builder about the various stages and subsequent draw downs.
If on the other hand you require Lender finance then we are able to help. At Custom House Design we recommend you speak with our partner business Custom Finance Brokers about alternative lending solutions.
Construction loans differ to everyday variable rate mortgage products as the borrower is not required to pay interest on the entire loan nor pay principal and interest until construction is completed and the Occupancy certificate has been issued. Up until this time interest will only be paid on those funds which have been drawn down.
Generally speaking there are six scheduled stages of construction. An example of such a schedule may be:
|Stage||Payment||Description of work|
|Deposit||5%||Plans, development applications, insurances|
|Base / slab||15%||Site works, slab or other footings|
|Frame||25%||Completion of framing, inspection|
|Lock-up||25%||Windows / doors, cladding, roofing|
|Fittings||20%||Internal linings, floor coverings, joinery, air conditioning, electrical, painting|
|Completion||10%||Fencing, landscaping, driveway, site cleanup|
At the completion of each stage and prior to commencement of the next your chosen Lender will require an invoice from your Builder, they will likely also conduct an inspection to ensure that all works have been done in accordance with the stamped floor plans and fixed priced building contract before advancing the funds for the next draw down.
Once construction is complete the loan reverts to principal and interest repayments and you may select the type of loan going forward from amongst the Lender’s other mortgage products.