Construction loan: Construction home loans & owner builder loans

Oak Laurel | Finance brokers 

Do you want to talk to a finance professional about a construction loan? We can help.

Construction loans & building loans: what you need to know

Looking for a construction loan? Are you a developer, planning on renovating or building? Undertaking a construction can be an exciting and sometimes stressful experience. Getting your finances in order should be your first step in the process, before you start looking for land or a property to build.

Construction loans can be complex. Building is complicated enough without the complication of the financing. We can assist you to gain a construction loan that is right for you, so you can focus making your project a success.

Not all banks have construction loans and some have construction loans but don’t do them well. Depending on the lender you may get charged higher interest rates or fees on a construction loan.  Many construction loans allow you to draw down you payments progressively as payments are made on completion of each stage of the building. This means that you only pay interest on the money that has been drawn. However, there can be a range of fees and charges such as draw down fees, and lenders typically want to have the progress inspected with fees and charges associated with this.  The last thing you need is a holdup with your construction because of trouble getting the bank to make progression payments. However, there are some which do not do progress inspections or charge fees draw down fees.

After the construction phase is finished you may also be able to convert your construction loan into an ongoing home loan or investment loan.

construction loans how do they work?

Contact us about getting a construction loan.

An Oak Laurel mortgage broker will go through your construction project with you to ascertain the best way forward.

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A construction loan is a type of mortgage for people that want to build a new property.

Construction loans aren’t set up like a normal home loan at the start. The total amount that is needed to complete the building is approved by the lender. These funds are then placed in your loan account. As progress is made on the property by the builder, the construction loan is progressively drawn down to make the progress payments to the builder. Usually you only need to pay interest on the amount of loan that has been drawn (taken out to pay the builder). Loan payments typically remain interest only during the construction phase, reverting to principal and interest after the construction is complete.

Construction loans can be used for house and land packages, they can also be used to build on vacant land that you already own.

Specialist construction loans

Yes, we can help customers get a construction loan with bad credit.

We can help people that do not qualify for a traditional construction loan because they have bad credit. This includes people with an unlimited number of defaults, judgments and writs up to $1,000 (paid or unpaid) or higher on a case by case basis.

However, if you have bad credit it is likely that your interest rate will be a bit higher than a standard construction loan without bad credit.

Talk to one of our brokers about getting a bad credit construction loan.

What are the costs of a construction loan?

Some other costs associated with a construction home loan include:

Stamp duty is a State government tax and is usually the largest expense after the property purchase price.

The amount of Stamp duty that you will need to pay will vary depending on the different state or territory where you purchase the land or property. See more here about Stamp duty.

Know your building contract

Finding a reputable builder is the first thing to do after you’ve made the decision to build. Next, you will need to enter into a building contract with a licensed builder. The contract is a legally binding document. Ensure you read the fine print!

It is your responsibility to go through the terms and conditions with your legal representative. Never sign anything unless you are 100% certain you understand what it means.

Ask the question of your builder – do you have all the necessary insurance policies in place? Whilst the lenders do not need to sight the following documents, it is strongly recommended that you obtain the following documents from your chosen builder:

  1. Builders License
  2. Home Warranty Insurance (NSW/QLD) – also known as Builders Warranty Insurance (VIC), Building Indemnity Insurance (SA), Home Indemnity Insurance (WA), Housing Indemnity Insurance (TAS), Building Warranty Insurance (NT)
  3. Employers Liability and Workers Compensation

Remember: At the completion of your construction you will need to obtain an Occupation Certificate, also known as an Occupation Permit, from your local council.

Construction loan broker - construction loan process

What are the steps in the construction loan process?

There are 10 steps to the construction loan process. These are:

Step 1 – We Interview You and use the information you provide to recommend a loan for you.

Step 2 – We Complete Your Loan Application

Step 3 – The Lender Assesses Your Application

Step 4 – The Lender Will Provide You with A Conditional Approval

Step 5 – Valuation of the Security You Will Provide

Step 6 – Approval from the Lenders Mortgage Insurer

Step 7 – You are granted Formal Unconditional (loan) Approval from the Lender

Step 8 – The lenders prepares the mortgage documentation

Step 9 – Your Insurance Requirements

Step 10 – The Settlement of your loan


Low doc construction loans

Are you self employed and want to get a construction loan but don't have all your proof of income documentation? A low doc construction loan may be an option for you. Low doc construction loans allow flexible options for proving your income.

Owner builder loans

Are you planning to build your own home as an owner builder and need finance for it? Find out all you need to know about owner builder loans:

Construction loans with bad credit

Are you planning to build your dream home but have bad credit problems? Bad credit construction loans are available from some understanding lenders. Find out what you need to know about getting a construction loan with bad credit.

Large property development project finance

Are you undertaking a large property development project? Large property development project require a different type of finance to a construction loan. Find out about property development finance here:

Oak Laurel Finance Brokers – Development finance made easy!

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