Construction Home Loans
A "construction home loan" is used where you own the land on which you wish to construct a dwelling, or you have purchased a "house & land package". These loans progressively draw down the amount needed to purchase the land and progressively pay the builder as your house is built. Once the home is completed, the loan reverts to a standard Principal & Interest Loan, or Interest Only - as best suits you - beyond the construction period.
When you are building your own home the banks will generally be looking for a fixed price construction contract from a reputable builder. It is important that you have council approved plans and specifications, along with any conditions of approval specified by the local council.
A bank’s valuer will then be engaged to estimate the end value of the project. It is against this value that the banks will generally lend.