Construction Mortgages

If you're thinking of building your dream home, a construction loan may be for you. It's available from many different mortgage lenders, so you can choose the home loan that best suits your needs.

You can use a construction loan to purchase land and construct a dwelling, to refinance an existing loan from another loan provider and construct a dwelling, to finance the construction of a dwelling on existing land or even to conduct major renovations to a new or existing property.  It’s a great way of financing your building project so that you can build your perfect home. 

The loan amount is determined using construction cost estimates, which come from quotes and tenders from builders, as well as council approvals and the amount of work estimated to be carried out by yourself or family and friends.  The lender will then approve the loan and you access the funds in stages, as each major part of the construction is finished.  You are required to pay only the interest during the construction phase.


You only pay interest on the funds which you have withdrawn, rather than the total loan amount, which offers an affordable way to finance the construction of the property.  Some construction loans will allow you to make small repayments during the construction phase, thereby reducing the principal and interest on the loan.

However, as the rate is variable, your repayments will go up during the construction phase if interest rates rise.  
After completion the loan becomes a standard variable rate loan. In some cases it becomes a fixed interest loan.
You may be able to have your wages paid into your loan account to reduce interest and use the interest free period on a credit card for purchases before paying the credit card bill from the loan account .  Put lump sum payments like tax refunds into your loan account. If you need some of the money later on, use the redraw facility.

Government grant for building your first home.
If this is your first home, then you can access the first-home owners grant.  In October 2008, the Federal Government announced an increase to the grant.  However, after 31 December 2009 the grant will revert back to its original $7,000.  To find out if you are eligible you can visit http://www.firsthome.gov.au/


Call and talk to a local mortgage broker to find out if a construction loan would suit you and how to apply for the grant.  Call us on .



 

Will you qualify? Should you fix your rate or ride it out with a variable rate? Get the inside track when you speak with a Perth Mortgage Broker.

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