The Basics Of Construction Loans Part One
Securing a loan to build a home is a little different than buying an established house because often the land and building purchase will need to settle separately.
To accommodate this, your lender will likely run your initial loan as two separate but simultaneous applications - one for the land purchase and the second for the completed house and land cost.
The second application will eliminate the first loan and leave you with just one loan.
Most lenders will also require that you build on your land within two years of settlement - this does not mean you need to finish the home within the two year time frame, you just need to start building within two years of settling on your land.
The construction of your home will generally be conducted in stages, with payments required at the end of each stage.
The bank or lender only charges you on the amount of money you have drawn down, therefore your minimum repayment will vary depending on which stage your home has reached.
While most construction loans have a variable interest rate, there are some available that operate as fixed rate loans. If you do use a fixed rate construction loan, you may end up with one rate on your land loan and a second rate on your construction loan.
To get more detailed information on your situation, talk to a Loan Market mortgage broker today