Having a house built to your own specifications, or choosing the perfect house and land package, are possibly the best routes for getting a home that’s just right for you. And to make your dream a reality, you’re going to need a construction loan, a special type of home loan designed to be drawn down in stages.
Find out everything you need to know about construction loans and compare your options right here.
How construction home loans differ from standard home loans
- Borrowing capacity. The amount you can borrow for a construction loan, as well as being based on your income and credit rating, will also be calculated as a percentage (e.g. 80%) of the expected value of the house and land when the building is completed.
- Progressive drawdown. Instead of borrowing this amount in full immediately, borrowers draw down progressive amounts so that they can make payments for the purchase of the land, stamp duty on the land title transfer, payments to the architect (if any), and progressive payments to the builder as the construction proceeds.
- Interest-only at the start. Construction loans are typically interest-only for the first 12 months, after which time they revert to the standard pattern of repaying both principal and interest. But you may be able to retain it as an interest-only loan if you wish, depending on the lender.