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Construction Loans | |
If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed. A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a ‘fixed price building contract’ and ‘council approved plans’.
Advantages:
- Competitive variable interest rates.
- Facility to draw money when necessary whilst building.
- Interest only payments during the building period.
- Additional payments can be made.
Disadvantages:
- Requires a fixed price building contract leaving little room for change whilst building.
- Some lenders charge a fee for every time you draw money whilst building.
- Given it is a variable loan; loan repayments will increase if interest rates go up.
