Building a new home – Geelong Loans

July 3 2017 | GFG News, Home Loans

Building a new home could be one of your most exciting adventures! It may be the freedom of being able to design your own property to suit your style and taste, or the knowledge that everything will be entirely new. Always dreamed of having that home studio? How about a lap pool or deck for entertaining? Why not!

Building a new home is your own adventure, a new chapter that comes with a lot of excitement and new memories. So, whether you’re buying off-the-plan, or doing the building yourself, call us now about finding and securing the right loan for you and your financial position!

Building your property

Finding the right loan when building your home could potentially save you a lot money on interest. For example, rather than delivering the entire loan amount for the build all at once, a construction loan will allow you to borrow in stages as your home is being built, meaning your builder will be paid throughout the construction process. Using this loan type means you only have to pay interest on the loan amount you have actually used.

Dependent on your lender and their lending criteria, they will usually require council-approved plans and a fixed-price building contract before they will approve your construction loan. A valuation expert will then use these to help estimate the on-completion value of the property. Once that process is complete the lender will then assess the final loan application on whatever is less – the on-completion value, or the land price and cost of construction.

The benefits of construction loans

With a construction loan you will only need to pay interest on the actual amount you have drawn as the build is being financed, not the entire loan amount.

The lenders valuation expert will usually inspect the progress of the build as each phase of construction is complete, the lender will then authorise the next draw down on your loan to pay the builder. One of the biggest benefits of a construction loan is the way your builder is being paid. A construction loan comes with a level of protection, this loan type will help avoid the build from falling behind schedule as well as any issues with the quality of work, your builder won’t be paid until each stage has been completed and inspected.

In some cases lenders will provide a slightly higher interest rate for construction loans, so talk to us to ensure you’re getting the best loan for your needs. If necessary, we may advise you to use an alternative loan, for example setting up a line of credit facility.

What is ‘buying off-the-plan’

Buying your property off-the-plan only requires you to pay the deposit up front, it is a term used to describe the scenario where you buy your home from a developer before it has been built. In this scenario organising your finances may not be as straight forward as buying an established home, as there is a large period of time between paying your deposit and final loan settlement. You will also be required to seek advice from a solicitor regarding the details in the contract for your off-the-plan property purchase, this guarantee that you are on the same page as the developer regarding what the price includes before you sign the contract.

Have a local Geelong professional on your team

As your local Geelong mortgage broker, we are here to explain the processes involved with arranging your finances to build your new home. It is important that you find the most suitable loan for your needs and objectives, there are many important things to consider when building your own home, and we’re here to help you through every step.

You may also be eligible for the First Home Owner Grant (FHOG) when building a new home, or qualify for stamp duty concessions or exemptions in some circumstances, even if it isn’t your first property purchase.

Planning ahead is the key to success when building a new home, construction loans can be complicated which is why it’s a good idea to call us for help. If you’re ready to make your new dream home a reality, please call us today.

Geelong Office: (03) 5229 2048

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