Lending Solutions

As the name suggests, a construction loan will allow you to build your new home. If you have a specific building in mind, this is a great loan option for you.

A construction loan can be used to buy for the vacant land and then fund the construction. The amount to be borrowed will depend on the total cost of the build and it will be provided in progress payments. Progress payments are when the lender release funds directly to the builder as different phases of the construction progress. With each draw, your repayment will increase.

When you apply for this loan, one of the many documents you will need to provide the lender with is a Fixed Price Contract which will show the total construction costs. The lender will then use this value and the land value to establish a security value. They will use this value to confirm their loan amount.

This type of loan is not like a regular mortgage wherein the entire loan is funded at settlement. This loan is released via progress payments. The lender will assist with your land purchase (or refinance) and then assist with construction. As the builder completes each phase, the lender will then release part of your loan to the builder. It’s important to understand that each lender has different progress payments structures and criteria but normally progress payment will look the below:

1. The first release will happen during the foundation or footings phase
2. The second fund release will include the frame or the brickwork
3. The third release is for the lock-up phase. It is when the windows, doors, walls, and insulation will be added to the home
4. The fourth release will be during the second fix or the phase when the electrical, fixtures, cabinets, tiling, etc is done
5. The last release will be on completion. This is the painting and finishing touches

These loans will ensure that the loan will only pay for the construction that is being done.
It is a great way to ensure that your funds are available to complete construction.