Construction & Bridging Loans
Building Your Future: A Guide to Australian Construction Loans
Thinking of building your dream home instead of buying? A construction loan provides a flexible way to fund your project, ensuring your builder is paid for each stage of work as it is completed.
Year :
2024
Mont Clair Capital
Thinking of building your dream home instead of buying? A construction loan is a unique financial product designed to fund exactly that. Unlike a standard home loan that pays a lump sum, a construction loan provides a structured and flexible way to finance your build, ensuring you have the right funds at the right time. This guide will walk you through how they work and what you need to know to get started.
How It Works :
A construction loan is a financial tool that pays your builder in stages, not all at once. This is called a progressive payment or drawdown schedule.
No Lump Sum: You are not given the full amount of the loan upfront. The funds are held by the lender and are released to your builder as they complete each stage of the construction.
Interest-Only Period: During the build, you only pay interest on the money that has been drawn down. This keeps your repayments lower and more manageable while you are still living in your current home.
The phased payment system is designed to protect both you and your lender.
For You: It gives you a way to ensure the builder is meeting their obligations. A payment is only released after a stage is completed and verified, which incentivizes the builder to stick to the plan and timeline. It prevents you from paying for work that hasn't been done.
For the Lender: It reduces the risk of the builder going out of business mid-project. The lender knows that for every dollar they release, there is a completed asset of equal or greater value on the property.
Key Construction Stages :
Slab Down / Base Stage (~10% of the loan): The payment is released after the site is prepared, the foundations are laid, and the concrete slab is poured.
Frame Stage (~15%): The builder receives funds once the home's frame is erected.
Lock-Up Stage (~35%): This is a significant milestone, covering the installation of the external walls, roof, doors, and windows, making the home secure.
Fixing Stage (~30%): The bulk of the internal work is funded here, including the electrical wiring, plumbing, and plastering.
Practical Completion / Handover (~10%): The final payment is made after the home is fully finished, a final inspection is passed, and all documentation is provided. The loan will then typically convert to a standard home loan.
What Else You Should Know :
Fixed vs. Cost-Plus Contracts: Lenders strongly prefer a fixed-price contract, which guarantees the final cost of the build. A cost-plus contract can be risky as the final cost is unknown, and many lenders will not approve a loan for this type of agreement.
The Valuation Process: A bank's valuation of a construction loan is unique because the property doesn't exist yet. The lender will value the property on completion, based on the building plans and your signed fixed-price contract.
Required Documentation: To get a construction loan, you will need a signed fixed-price building contract, council-approved building plans, and proof of your builder’s insurance and license.
Expert Guidance: A broker who specializes in construction loans can help you find a lender that offers flexible drawdown schedules and favorable terms for your project.
More Projects
Construction & Bridging Loans
Building Your Future: A Guide to Australian Construction Loans
Thinking of building your dream home instead of buying? A construction loan provides a flexible way to fund your project, ensuring your builder is paid for each stage of work as it is completed.
Year :
2024
Mont Clair Capital
Thinking of building your dream home instead of buying? A construction loan is a unique financial product designed to fund exactly that. Unlike a standard home loan that pays a lump sum, a construction loan provides a structured and flexible way to finance your build, ensuring you have the right funds at the right time. This guide will walk you through how they work and what you need to know to get started.
How It Works :
A construction loan is a financial tool that pays your builder in stages, not all at once. This is called a progressive payment or drawdown schedule.
No Lump Sum: You are not given the full amount of the loan upfront. The funds are held by the lender and are released to your builder as they complete each stage of the construction.
Interest-Only Period: During the build, you only pay interest on the money that has been drawn down. This keeps your repayments lower and more manageable while you are still living in your current home.
The phased payment system is designed to protect both you and your lender.
For You: It gives you a way to ensure the builder is meeting their obligations. A payment is only released after a stage is completed and verified, which incentivizes the builder to stick to the plan and timeline. It prevents you from paying for work that hasn't been done.
For the Lender: It reduces the risk of the builder going out of business mid-project. The lender knows that for every dollar they release, there is a completed asset of equal or greater value on the property.
Key Construction Stages :
Slab Down / Base Stage (~10% of the loan): The payment is released after the site is prepared, the foundations are laid, and the concrete slab is poured.
Frame Stage (~15%): The builder receives funds once the home's frame is erected.
Lock-Up Stage (~35%): This is a significant milestone, covering the installation of the external walls, roof, doors, and windows, making the home secure.
Fixing Stage (~30%): The bulk of the internal work is funded here, including the electrical wiring, plumbing, and plastering.
Practical Completion / Handover (~10%): The final payment is made after the home is fully finished, a final inspection is passed, and all documentation is provided. The loan will then typically convert to a standard home loan.
What Else You Should Know :
Fixed vs. Cost-Plus Contracts: Lenders strongly prefer a fixed-price contract, which guarantees the final cost of the build. A cost-plus contract can be risky as the final cost is unknown, and many lenders will not approve a loan for this type of agreement.
The Valuation Process: A bank's valuation of a construction loan is unique because the property doesn't exist yet. The lender will value the property on completion, based on the building plans and your signed fixed-price contract.
Required Documentation: To get a construction loan, you will need a signed fixed-price building contract, council-approved building plans, and proof of your builder’s insurance and license.
Expert Guidance: A broker who specializes in construction loans can help you find a lender that offers flexible drawdown schedules and favorable terms for your project.
More Projects
Construction & Bridging Loans
Building Your Future: A Guide to Australian Construction Loans
Thinking of building your dream home instead of buying? A construction loan provides a flexible way to fund your project, ensuring your builder is paid for each stage of work as it is completed.
Year :
2024
Mont Clair Capital
Thinking of building your dream home instead of buying? A construction loan is a unique financial product designed to fund exactly that. Unlike a standard home loan that pays a lump sum, a construction loan provides a structured and flexible way to finance your build, ensuring you have the right funds at the right time. This guide will walk you through how they work and what you need to know to get started.
How It Works :
A construction loan is a financial tool that pays your builder in stages, not all at once. This is called a progressive payment or drawdown schedule.
No Lump Sum: You are not given the full amount of the loan upfront. The funds are held by the lender and are released to your builder as they complete each stage of the construction.
Interest-Only Period: During the build, you only pay interest on the money that has been drawn down. This keeps your repayments lower and more manageable while you are still living in your current home.
The phased payment system is designed to protect both you and your lender.
For You: It gives you a way to ensure the builder is meeting their obligations. A payment is only released after a stage is completed and verified, which incentivizes the builder to stick to the plan and timeline. It prevents you from paying for work that hasn't been done.
For the Lender: It reduces the risk of the builder going out of business mid-project. The lender knows that for every dollar they release, there is a completed asset of equal or greater value on the property.
Key Construction Stages :
Slab Down / Base Stage (~10% of the loan): The payment is released after the site is prepared, the foundations are laid, and the concrete slab is poured.
Frame Stage (~15%): The builder receives funds once the home's frame is erected.
Lock-Up Stage (~35%): This is a significant milestone, covering the installation of the external walls, roof, doors, and windows, making the home secure.
Fixing Stage (~30%): The bulk of the internal work is funded here, including the electrical wiring, plumbing, and plastering.
Practical Completion / Handover (~10%): The final payment is made after the home is fully finished, a final inspection is passed, and all documentation is provided. The loan will then typically convert to a standard home loan.
What Else You Should Know :
Fixed vs. Cost-Plus Contracts: Lenders strongly prefer a fixed-price contract, which guarantees the final cost of the build. A cost-plus contract can be risky as the final cost is unknown, and many lenders will not approve a loan for this type of agreement.
The Valuation Process: A bank's valuation of a construction loan is unique because the property doesn't exist yet. The lender will value the property on completion, based on the building plans and your signed fixed-price contract.
Required Documentation: To get a construction loan, you will need a signed fixed-price building contract, council-approved building plans, and proof of your builder’s insurance and license.
Expert Guidance: A broker who specializes in construction loans can help you find a lender that offers flexible drawdown schedules and favorable terms for your project.