step 1

How they work

Basically, a construction loan is like a really large line of credit loan that helps you pay for your build as and when you need funds. Once the build is complete, your loan then reverts to a regular home loan.

Say the cost of building your new home is going to be $600,000, and you’re currently paying an existing mortage on your old house of $350,000. The last thing you want is to go into debt for $950,000.

This is where a construction loan helps – you are able to arrange finance for the cost of your new build, but the full amount isn’t drawn down all at once from the get go. As your build progresses, and you’re able to sign off on a certain phase of it, you can draw down only the money you need.

So, after 3 months of your build, you may be ready to draw down only $50,000 of the total build cost of $600,000. A construction loan lets you do this.

step 2

Draw down with security

As each of the phases of your build are completed, you draw down only the funds you need to pay your builder & suppliers.

What this means is that with an interest-only construction loan, you only complete a draw down and start paying interest on the drawn down amount once you’re completely satisfied that all work that was agreed upon has been completed. To complete a draw down, we’ll ask you for things like builder’s invoices and a progress claim certificate.

step 3

Good to know

  1. Inspections & Valuations

    Before you start building, we’ll need what’s called an ‘as complete’ valuation, as well as further inspections and valuations throughout your building project.

  2. Cost overruns

    No two projects are the same, and none are perfect. If at any stage in the build your costs exceed the amount we’ve agreed upon, get in touch ASAP. If we’re not able to help out, these are costs you may have to absorb.

  3. Insurance

    Before you can make any draw-downs, you’ll need to have all your insurance in place, like Builder’s All Risk insurance, Domestic/Home Warranty Insurance and Public Liability Insurance.

step 4

Final payment

Once your build is complete, we’ll try to make things as smooth as possible so you can kick start the celebrations.

For new builds, we’ll just need a copy of the occupancy certificate to release your final loan draw down, and then your loan is ready to revert to a principal and interest loan product of your choice – a Greater Bank lender can help you decide which loan type best suits your needs.

Once that’s done, and your new repayments take effect, it’s party time!