What is Construction Finance?
If you are planning on building a new house or renovating your current property, then chances are you will be considering taking out construction finance. Building can be a very expensive process, and this is why you will need a financing solution that is specifically designed for the needs of somebody taking on new construction.
New construction loans, or construction finance, caters to landowners that are looking to build or renovate. A basic requirement is that you will need to own the land in order to qualify for such a loan.
What sets these financial offerings apart is that they are entirely progress based. This means that you will get paid out the loan in different stages – according to the progress and stage of construction. Interest is then only paid on the amount that you have currently withdrawn.
You will only start to make full interest and principal payments once all of the construction is complete, and all financial draws have been done.
This kind of finance has been specially designed to make construction easy for the homeowner. Instead of taking out one large sum of money at once, the different stages will help to make repayments lower. This also allows for better financial planning of your build over the course of the project.
Why Get a Construction Loan?
If you are about to start building a house, you will need to consider your financial options. Specialised construction finance loans have become a popular choice for homeowners, as these options are specifically tailored towards construction needs. The loans are designed to make the entire process of building a whole lot easier and more stress-free.
A construction mortgage aims to make it easier to pay back the money. Through breaking up the loan payouts into separate amounts, you are only responsible for paying interest on each instalment in question. For example, if you take out a loan for $200,000, but only require $50,000 for the initial construction period, then you will only pay interest on $50,000 during the construction period. This allows for better financial planning and helps to avoid massive repayments from the get-go.
When taking out a house building loan, it also takes more organisational pressure off you. Your construction finance provider will liaise with the builders, land agents, settlement agents, and figure out all of the details for you. This is a simplified way of handling construction finances.
Advantages of Home Construction Loans
Taking out one of these loans has many benefits for the homeowner to enjoy. Here are some of the major advantages of using this kind of service.
One of the big reasons that attract many people to these loans is easy approvals. Often it is far easier to be approved for a construction loan from a private lender than it is to get a loan from the bank. Whether you are a real estate developer, or a homeowner looking to do some renovations, these loans are a popular choice.
When borrowing from a private lender, the terms of the loan can often be better tailored to suit your needs. As each construction project can be vastly different, the loan structure should also be flexible. Banks tend to have strict guidelines on their loans that won’t change from person to person. Construction finance will work to create the best offer for both parties involved.
Pay Interest Only
The major drawcard of these loans is that you only have to pay interest on the withdrawn amount. Not having to pay for the capital during the course of construction is hugely beneficial, as building can be full of unwanted surprises. Waiting until construction is over before starting to pay for the capital is a very useful feature.
Finding the Right Construction Finance For You
Whether you are looking to build your first home, investment property, or do some major renovations, construction finance is a great solution. At Silkwood Homes, we can make this dream a reality.
Finding a construction loan provider that understands your specific needs and can tailor the loan to suit you is very important. Get in touch with us to discuss your requirements and we will recommend the best financial plan going forward.
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