Construction or Renovation

A construction home loan is designed for people who are building a home or doing a major renovation to their existing home, as opposed to buying an already established property.

The structure of the loan is different to that of people buying an existing home. Construction loans are funded by the Bank / Lender making regular progress payments to the builder at various stages of construction, eg, slab being laid, frame being constructed, roof being installed, etc.

There are generally five progress payments (also called drawdowns) in a construction loan, to ensure the funds are released at the appropriate time compared to the level of the new house (or renovation) build works having been completed.

"Building the right home loan for you."

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.

Interest Savings

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.

Lower Repayments

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.

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