In an environment where interest rates on mortgages are constantly changing, locking in a rate can be a useful option to protect your interest rate for a set period of time (usually 30 to 90 days).
Are you considering renovating or building, but don’t have the cash on hand to cover the cost? It could be worth considering a construction loan.
A construction loan is a type of home loan suitable for those who are building a home or doing major renovations. The structure of a construction loan differs from a home loan for people buying an existing home.
For cosmetic renovations and smaller jobs, you may be able to simply cash out some equity, and manage the payment yourself. However, for more substantial or structural jobs, you will likely need a construction loan.
A brief summary of the main characteristics of a construction loan are:
- You will need to provide all of the plans and specifications of the build to the bank, including the building contract
- The bank will conduct a complete valuation, which is what they expect the property will be worth after completion
- The bank will pay your builder directly, through a series of progress payments
Construction loans can be complicated, as there are a range of factors you need to be across
- You may need a DA approval
- You may need a QS report
- Understanding the different building contracts etc.
Although most banks can facilitate a construction loan, some are easier to deal with than others, so it is extremely important to review your options.
At Azura Financial, we recommend speaking to your broker as early as possible to workshop your scenario. Watch our video here to watch Director Tom Hawley discuss construction loans. If you have any questions, we’re happy to have a non-obligatory chat with you. Feel free to give us a call or fill in the form here and we will organise a time to call when suits you.