All You Need To Know About A House Building Loan

Building a home from the ground up is a very exciting project to undertake. It is essential, though, to pay attention to the finer details of your house building loan to ensure that everything runs smoothly from a financial perspective.

Read on to learn everything you need to know about a house building loan, including considerations that will be taken into account before a loan is issued.

What Is A House Building Loan?

This type of loan, also known as a construction loan, has been developed for the specific purpose of financing a new home build. The total construction costs will have to be established and agreed upon in advance, and then the funds will be released in phases as the project progresses.

In most cases, the interest rate is market-related and can fluctuate over time. On completion of the build, the interest customarily switches to a fixed rate. Your mortgage advisor will be in the best position to secure a good deal for you as they can negotiate with various banks and lending institutions on your behalf.

Considerations Before A House Building Loan Will Be Granted

Before issuing a house building loan, the bank or financial institution will look at several factors to assess your risk profile. This puts them in a position to make you an offer on the terms of your loan, including borrowing limits and repayment schedules.

Factors that they will consider include:

  • Architectural plans and other designs for your build
  • The total estimated cost of the build
  • The amount of the deposit 
  • Location of the building site
  • Assets and income of the lender
  • Number of income earners in the household

Borrowing Limits And Repayment Schedules

Banks and financial institutions will offer different options around the borrowing limit and repayment schedule. Some will offer up to 90% of the construction contract amount, especially in the case of a turnkey project. Most institutions will offer turnkey, build-only loans and partial contract loans.

Repayments vary, with some requiring interest-only repayments during the building process and switching to larger payments on completion. Your mortgage advisor will be able to provide you with full details on these arrangements and help you choose the best option to suit your budget.

Get in touch with Simpler today, and we can answer all your questions about a house building loan or construction load for your new project. We can secure the best rates and a deal that will work for you, all with a quicker and simpler process.

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