January 3, 2015 (Powerhomebiz.net) With the financial assistance provided by the government in the form of First Home Owners Grant (FHOG) scheme, it is no secret that many Australians are choosing to build their new dream home and that construction loans are becoming more popular than ever.
Singh Finance’s Risk and Compliance Specialist Frank Zelasko informed that lenders/credit providers have different credit policies and requirements that they adopt when processing construction loans. However, most are similar. Here is a list of how the lenders/credit providers fund construction loans:
• They will fund the loan amount required by the borrowers to cover the cost of purchasing a vacant land and for the building construction costs
• Before construction starts and if the borrowers have already borrowed to purchase vacant land on which they are building new dream home, the first loan disbursement made by the lender/credit provider will go towards paying off the vacant land
• They will break down the loan amount into “progress payment drawdown” amounts, which are made to the builder at the completion of each construction stage
Construction loans, whilst they are similar to a traditional mortgage, have some key differences. Here is a list of the key features of a construction loan:
• Construction loans are typically a short-term solution with a maximum of one year
• The borrowers will be expected to pay Interest Only payments during the construction period
• Interest is only calculated against the portion of the loan amount that has been drawn down
• Construction of the new home must commence within 12 months of loan settlement
• Construction of the new home must be completed within 12 months of the first progress drawdown payment
The lenders/credit providers will arrange for valuations to be prepared before “progress payments” are made to the builder and at the completion of each of the following construction stages:
>> For the purchase of the vacant land
>> After the laying of the flooring
>> After the installation of the roof (including the frames)
>> At lock-up stage, and
>> At the completion stage
The lenders/credit providers will need to see copies of the following documents, before issuing unconditional approval:
• Fixed Price Building Contract, and
• Council approved plans and specifications
Upon completion of the building project, the construction loan will roll over into a standard principal and interest home loan.
Mr. Zelasko says, “As with any aspiring new home owner, buying your first home at any stage of life can be an overwhelming process. Not to mention knowing which specialised lender/credit provider is willing and able to assist you, can be both daunting and time-consuming. So, having an expert finance broker of Singh Finance on your side will save you lots of time and heartache.”
ABOUT SINGH FINANCE
http://www.singhfinance.com.au is a reputed Australian finance brokerage firm that employs a team of expert and professionally qualified finance brokers. The team will leave no stone unturned in obtaining a pre-approved construction loan. Call on 0424 190 908 or enquire online now.