How to construct your Dream Home with the Help of Construction Loans?
The idea of building your new dream home can be both very appealing and very exciting. If you are deciding to build you new dream home, there are a lot of things you need to consider prior to commencing your building project, for example, you may have to decide:
>> Do you want to demolish the existing home you live in and re-build a new home?
>> Do you want to purchase vacant land and construct a new residential dwelling on the purchased land?
>> Do you have ready cash available to cover the construction costs?
>> Do you have to get a Construction Loan (also known as a Building Loan or Construction Mortgage) to fund your building project?
>> If you are a first home buyer, you will have to find out about the Government’s First Home Owner Grant Scheme
Once you have decided on the above-mentioned factors, you will have to start your work on construction home loan or real estate finance which is secured by a mortgage on the property being financed.
Lenders/credit providers have different construction time frames and drawdown schedules that they allow for construction loans. However, most are similar, and here is a quick synopsis of how a construction loan works:
>> The lender/credit provider will fund the loan amount required by you to cover the cost of purchasing the land and for the building construction costs
>> He/she will break down the loan amount into progress payment amounts drawdown, which are made to your builder as each stage of construction is completed
>> He/she will require the construction of your new dwelling to be completed in the short-term (usually from 6 months to three years)
>> He/she will take required real estate security by securing a mortgage on the property being financed
>> He/she will charge Interest Only during construction (interest is only calculated against that amount that has been drawn down)
If you are interested in a construction loan, then my best advice is to get a pre-approval with the help of an expert finance broker. He/she will help you to know and understand:
>> How much disposable income you will want?
>> How much will your building project cost?
>> How much cash (down payment) do you have to put into your building project?
>> How much can you afford to borrow?
>> Where can you score the best construction finance deals and products?
>> If you are eligible for the First Home Owners Grant scheme as a First Home Buyer?
Once you discuss these things with the finance broker, you will be able to judge your financial situation in a better light. It will aid the broker in finding pre-approved construction loan packages for you. You can start looking for a new location to build your dream home, or you can look at demolishing the existing home you live in to re-build a new home after obtaining pre-approval.