Construction loans differ from when you buy an established home, the difference is that there are 2 things needing to be paid for – the land and then the construction of your new home.
Your loan itself can either be done in 2 parts – first to pay for the land, then a second application to fund the construction – or in a single application which covers both from the outset.
During construction, Shelford First isn’t paid for the whole house in one go, it is paid at various stages of completion. They will give you ‘progress claims’ at different stages of your home’s completion which are then submitted to your lender for them to pay from your available loan funds.
In this way, your loan balance isn’t at its maximum from day one but rather increases in stages according to the progress of your home being built. Your repayments during construction are generally ‘interest only’ as well, meaning that you are paying the interest charges only on the drawn balance of your loan – particularly helpful if you’re paying rent at the same time! Once your house is finished and the bank pays the final progress claim, your loan will normally revert to a ‘principal and interest’ loan, but at that stage you will be moving into your new home and not having to pay rent too!
Speak to a Best Loans specialist to answer all of your home loan questions!