The advantages of a construction loan are numerous, as outlined below:
By having progress payments made to the builder throughout the project, instead of handing over a lump sum in one instalment (especially at the commencement of work), borrowers and their lenders can make sure that the builders and/or contractors are being paid for work that has been completed, once you, as the client, are happy with that work.
You are only charged interest on the amount drawn down from the loan each month, as opposed to the entire approved loan amount, saving you money during the construction period.
Your loan is generally on interest only terms (rather than principal and interest payments) during the construction period, helping your cash flow while the work is being carried out. This is most useful if you’re also having to pay rent in another house until your home is ready to live in.
If you are renovating, there may be other borrowing options available to you instead of taking out a new construction loan, such as refinancing and extending your current mortgage, securing a line of credit facility or alternatively redrawing on any additional mortgage payments you may have made.
G.J. Finance can help you to understand all of the options available and then assist determine the right one for your individual circumstances.