Here’s what you need to know about financing a new build

Building a home can be difficult, but it doesn’t have to be. If you work with the right people (Hint: Golstruct Homes) and know what you’re doing it can be surprisingly stress free and extremely rewarding.

One part of the process that often confuses our clients is finance, so to make your build easier here’s everything you need to know.

How much deposit do I need?

In most cases you’ll be able to secure a construction loan with just a 10% deposit if you’ve got a fixed price contract to show your lender. If you’re buying a section, or have a labour contract you may need a deposit of between 25% and 35% of the loan amount.

With Golstruct Homes, the majority of our clients do a “home and land package” which only requires a 10% deposit. Plus, to make your life (and your loan) easier we offer TRUE fixed price contracts as an option on all our builds.

How do construction loans work?

Most construction loans kick in when the build starts and are then used like a big credit card to make progress payments as construction progresses.

Your lender will usually make these progress repayments direct to the builder at certain stages of the build. Your builder will need to provide a detailed break down of costs at each stage to have the funds released to them.

Payments generally come at these stages:

  • Site works, foundations and paper work.
  • Framing of walls and rooms. Roof installation.
  • The lockup stage when walls, windows and doors are installed.
  • Fit out when all the internal fittings and fixtures are added.
  • Final payment made when Code of Compliance is issued.

Often a representative of the bank will head out to the construction site and verify that the works have been completed at each stage.

Construction loans work a little differently to regular home loans. 

What are the benefits of construction loans?

Construction loans are pretty nifty – they’re built specifically to make the construction process as easy and affordable as possible.

For one, they’re often interest-only for the first year to help keep your costs down while construction is ongoing. In most cases they’ll also come with a year long conditional approval, giving you plenty of time to find the perfect site and a builder that you trust. After the first year the loan will usually revert to a standard principal and interest setup.

Building a home and managing a construction loan can be easy, and the end result can be phenomenal. Just make sure you surround yourself with good people that you can trust, from your lender and your lawyer to your builder. If you need help with the building part get in touch with the team at Golstruct Homes to get started.