Most would have aware of construction loans, because this has becoming more popular than ever and lots of men and women are choosing to construct their new home. So, if you’re looking to construct your dream house especially with the continued financial aid given by the government together with the First Home Owners Grant (FHOG) scheme, it’s the ideal time to do it. However, before you jump on the bandwagon and receive a loan, it’s crucial that you know the loan package in detail.
What is a Construction loan?
It is a short-term type loan meant for the people who would like to build your dream house. Suppliers that are lenders or the credit you are financing will secure a mortgage and they will make payments at episodic interval as the work progresses.
How does a construction loan funded?
Suppliers have requirements and credit policies that they embrace when processing a loan application. Most are similar. Here is a list of how lenders/credit suppliers fund for the new construction loan:
- Lenders/credit providers will finance the loan amount required by you to pay the cost of purchasing a vacant property and for the construction costs
- Lenders/credit suppliers will break down the loan amount to advance payment drawdown amounts, which can be made to the builder at the completion of each construction stage
How does a construction loan structured so far?
Construction loan, whilst it is comparable to a mortgage, has some differences. Here is a list of the features of a construction loan:
- It’s typically a short-term solution with a maximum of one year
- The creditors 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 your new home must commence within 12 months of loan settlement
- Construction of your new home must be completed within 12 weeks of their first progress drawdown payment
Analyze it thoroughly and thereby you can employ the loan to build your dream home as soon as possible. Also, you can use some experts to gather the information regarding this.