Construction
finance loan caters to the property owners interested in building or
renovation on the land they already own. For building homes in a
hassle-free manner, it is important to avail construction finance
from reputed lenders in Australia. We have explained here the basics
of construction finance in Australia and how the processing of
construction loans is carried out by the lenders.
What
is Construction Finance?
Each
lender or bank processes finance in a particular manner. Loan
application is submitted and approved in timely manner with a
conventional home loan.
Construction loans
are progress based finance, which means that rather than receiving
the full loan at once like home loans, borrowers will receive these
loans in steps throughout the stages of construction.
These
construction progress steps are called as progress draws. Borrowers
only pay interest on the amount that they have currently drawn from
the lenders or banks. Borrowers will begin paying full principal and
interest payments, once the construction of house is completed by the
builder.
Construction
Loan Processing: How Does It Work?
When
borrower applies for construction finance, the lender will require a
copy of the building tender/contract and the construction plans.
Lenders ask their experts to estimate the on-completion value of the
property. They will also assess finance on the lesser of land price
plus cost of construction.
Lender
will issue finance offer for borrower to sign and return, once their
loan has been approved. Once builder is ready to begin receiving
payments from the lenders or the bank, he will need to provide final
approved plans, drawdown schedule, building insurance papers and
other additional documents.
Paying
to Builder Directly
- Builders should send borrower an invoice.
- Borrower then completes and signs a drawdown request form, which is available at bank or with the lender.
- Lending agencies or banks may require a valuation for confirming the construction work that has been completed so far.
- Construction loans will be advanced to their builder generally within five working days.
- Borrowers should repeat this process for each construction work payment required by the builder.
Construction
Loan Specialists
Construction
loan specialists can quickly work out which lending agencies or banks
can approve the loan easily. Using their expertise, they can
structure the finance in a way that suits the needs of the borrowers.
