How to get a construction home loan
Some tips on getting a construction loan for your next luxury home build
Construction loans for new-built homes are either obtained by the homebuilder or prospective owner. In the past, small builders had greater access to capital but now must frequently put the onus on the buyer to get the loan. That’s one reason many new homes rising today are simply “specs” built by the builder.
The basics of construction loans
Let’s proceed on the assumption that you’re taking out an individual construction loan. Such loans, which can be tough to get without a previous banking history because of the lack of collateral (a finished home), have special guidelines and include monitoring to ensure timely completion so your repayment can begin promptly.
Construction loans are typically short term with a maximum of one - two years and have variable rates that move up and down with the RBA rate. The rates on this type of loan are higher than rates on permanent mortgage loans. To gain approval, the lender will need to see a construction timetable, detailed plans and a realistic budget, sometimes called the “story” behind the loan.
Once approved, the borrower will be put on a progressive drawn home loan, that follows the project’s construction stages and will typically be expected to make only interest payments during construction. As funds are requested, the lender will usually send someone to check on the job’s progress.
Why is there so little information on construction home loans
Why is there so little information or competing lender offers on construction loans online? For starters, these loans represent only a very small percentage of home loans. Plus, they’re a bigger risk. Hence, such financing isn’t the type of thing lenders aggressively market online; you have to hit the streets for it. Regional banks and credit unions are typically the best sources.
We recommend you contact Just Business Financial Services if you would like some more advice on financing your next home build. They also provide asset finance, trade finance, debtor finance and banking advisory services.
At Carmel Homes, we understand that there is more behind making your house into a home. We understand that you only want the best for your home. Unfortunately, in most cases the best can come at a high price tag. At Carmel Homes we believe everyone deserves the best. That’s why we feature a prestige line of products at prices that won’t break the bank. READ MORE >
While most builders delegate critical work to design teams and foremen, we (the owners) are present at the home sites daily in order to work with our tradesmen and ensure quality control. This superior level of attention is simply one advantage of building with Carmel Homes. We take this hands-on approach all the way to mid – size townhouse developments. READ MORE >