FREQUENTLY ASKED QUESTIONS
01 What is a construction loan? When you’re building a new home and need finance, you need a construction loan. These loans are drawn down in periodic payments while the home is being built. 02 What information is needed to apply for a construction loan? You’ll need to supply your lender with all the basics required for a home loan application, such as: • Demonstrated savings, and copies of bank statements and transactions • Proof of income showing your ability to repay the loan • A good credit rating • Anything else the lender requires, e.g. deposit But with a construction loan, you’ll need to provide additional information. As a general guide, this includes: • A copy of the Submission Plans for the new home
04 How is Interest charged on a Construction Loan? During the construction phase, you typically only pay interest on the amount that has been drawn down, not the entire loan amount. Once construction is complete and the full loan amount is drawn down, the loan usually converts to a standard home loan with principal and interest repayments. 05 What if I am refinancing from my current home loan? If you require refinancing from your current home loan Trinity Financial Services are able to research the market across 50 different lenders to ensure you are receiving the right product to serve your needs. TFS can also obtain a current market valuation of your current property to utilise your equity position for the best possible outcome.
06 What is the maximum LVR for a construction loan?
The LVR for construction loans generally sit between 80-95% however, this differs from lender to lender. There are different variables the lenders will look at which may effect the maximum they are prepared to lend you. This may include things such as location of property, LMI, property value, if it is for Owner Occupation or Investment purposes, etc.
• Council plans and permits • The contract with the builder • A copy of the builder’s insurance • A copy of the land purchase
• Any additional items the loan may be funding, e.g. swimming pool plans, landscaping plans, sheds, etc. The lender may then send someone to your site to evaluate the site you’re building on. 03 What are Progress Payments? After you have paid the Plan Preparation Fee and accepted the New Home Proposal, the next step for finance is what’s known as Progress Payments. To ensure the builder is only being paid for completed works, Lenders will send a valuer to check the work has been completed at each stage of the construction process before releasing the next payment. This ensures that builders and contractors are only being paid for completed work, not for work that is yet-to-be completed.
07 Do I have to make repayments during construction? You will be required to make the draw down
payments during construction as this will fund your build. However you will only be required to pay the interest component of only what has been drawn down until completion. Once the build is completed, the loan will switch to a standard Principle and Interest home loan.
10
Made with FlippingBook. PDF to flipbook with ease