Construction or Renovating Loans to suit you at Mortgage Choice - Clarkson WA

We specialise in all things construction loans, so if you are thinking of building get in contact with us at Mortgage Choice Clarkson for Northern Suburbs to see what options you have to build your dream home.

What are construction loans?

Construction loans are different from regular home loans due to building works requiring ongoing payments as the construction progresses.

In the case of a traditional home loan, the total of funds will be made available in a single lump sum, while a construction loan lets borrowers draw on the loan balance when payments need to be made to the builder.

These payments are made at key stages of the building process, and are known as progress payments.

 

Home Owner vs First Home Owner

The attraction of building a new home depends on the buyer.

For a homeowner, it can be cheaper or more feasible to knock down their current home and build a new one.

First home buyers are often drawn to the option because it allows them to take advantage of First Home Owner Grants and other concessions, like the recently announced $25k Home Builders Grant.

If you’re wishing to build a new home or upgrade the place you live in now, you will require a construction loan, which differs from a home loan for the purchase of an existing property.

A construction loan is structured around the building process, with borrowers able to balance when payments need to be made to the builder.

Some Advantages of Construction Loans;

You get to build a house according to your preferences, including layout, colour scheme and the like.

An advantage of a construction loan is that the construction period is interest-only, which minimises your repayments and saves you money. It's also done this way as you still have to live/rent elsewhere whilst your construction is underway.

At the end of the construction process, your loan can be reverted to a principal and interest mortgage.

 

Some Disadvantages of Construction Loans;

A lot comes down to what is and isn’t in the actual construction, known as inclusions. Often builders don't include items like fences, landscaping, window furnishings, driveways etc in the actual build project. These can be extras that you need to pay for at a later stage.

While construction loans offer many advantages, there are some drawbacks to consider. Firstly, lenders will want to see all the paperwork, such as council-approved building plans and building contracts, before they approve a loan.

Secondly, you may need a bigger deposit in order to be approved for a construction loan, as loan to value ratios are generally higher. In addition, you will have to factor in additional funds for finishing touches on your new home, as well as rent if you need to live elsewhere during the construction period.

 

Get in touch If you’re considering Construction or Renovating your home loan, with Mortgage Choice in Clarkson for northern suburbs WA on 94079881 or mandy.dickerson@mortgagechoice.com.au, you can also book an appointment on this website.

We’d love to help you secure a better deal.