Construction Loan

Construction Loan

When you apply for a construction loan, the lender will need a copy of the building contract/tender and the plans. They’ll ask their valuer to estimate the on-completion value of the property and will assess your loan on the lesser of the land price plus the cost of construction or the on-completion value.

Once your loan has been approved, the lender will issue a loan offer for you to sign and return, just like with any other home loan.

When your builder is ready to begin receiving payments from the bank, he’ll need to provide additional documents, such as the final council-approved plans, his insurance and drawdown schedule.

The typical construction stages are:

  • Construction stage Expected progress
  • Preparation Plans, permits, connection fees, insurance, driveway crossings, soil test.
  • Base/slab Concrete slab complete or footings and base brickwork complete.
  • Frame House frame complete and approved by building surveyor/inspector.
  • Lock-up Windows/doors, roofing, brickwork, insulation.
  • Fixing Plaster, kitchen cupboards, appliances, bathroom, toilet, laundry fittings/tiling, heating, fixing/internal doors, etc, plumbing, electrical, painting.
  • Completion Fencing, site clean-up, final payment to builder.

Progressive payment

  • The builder will send you an invoice.
  • You’ll then complete and sign a drawdown request form (available from your lender).
  • Send the drawdown request form and the invoice to the construction department of your lender.
  • The lender may require a valuation to confirm the work that has been completed so far.
  • The funds will be advanced to your builder generally within five working days.
  • Repeat this process for each progress payment required by the builder.

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