Browse Forums Home Finance 1 Nov 14, 2009 6:49 pm Our land loan has been varied to allow for an increase to construct a house. The paperwork we have received shows that our repayments are due to be increased each fortnight for the full cost of the whole house (& the land). Note that we haven't started construction yet. We received the paperwork yesterday and the new repayment date showed 9/11 - which is obviously incorrect as yesterday was 13/11/09. Question: I thought that our loan would be increased gradually when the extra amount is drawn ie: when progress payments are made, so that you only pay the full cost of the house when the final progress payment is made. Is this normal to pay the full cost of a loan for a house which hasn't even started being built yet? Re: Construction loan - when do you start paying? 2Nov 14, 2009 6:56 pm i may be wrong but i belive you only incure an interest charge on the funds that have been draw out of the account if the complete loan amount has been credited to your account for example $300,000 & you have only spent $100,000 of that then you only pay interest on the $100,000 not the total amount of the loan i may be wrong so it would pay to ask who ever gave you the loan but thats my understanding of how it works cheers rocket Re: Construction loan - when do you start paying? 3Nov 14, 2009 6:58 pm Yes you are right. You continue to make your repayments as normal on the land loan. When they increase it for the first progress payment this is when you usually pay interest only on the increases to your loan with payments to the builder. When the house is finished you then go back to paying weekly, fortnightly etc. Does this help you? Harribeka Re: Construction loan - when do you start paying? 4Nov 14, 2009 9:44 pm Thanks guys. We pay repayments on the land loan each fortnight, which is both principal and interest. I just thought that we wouldn't be paying for the house at all until progress payments were made. ie: continue to pay for the land each fortnight and then after each progress payment was made, the loan would be increased by this amount. I shall check with the bank on Monday. Cheers. Re: Construction loan - when do you start paying? 5Nov 14, 2009 10:17 pm Yes, your last post is correct. A construction loan is usually set up for a pre approved amount but you only pay interest, not principal, (although you may be able to pay extra to cover some of the principal if you wish) and you only pay interest on the amount drawn down at the time - ie the outstanding amount ,and therefore the minimum payment to cover the interest, increases with each progress payment to the builder. So, yes, this part of the loan will not need to be re-paid until you draw down for your first progress payment. If you are paying off the land, I guess that remains as interest and principal throughout, When handover takes place, your loan is then set up as a standard interest and principal loan. Does that answer your question?? Re: Construction loan - when do you start paying? 6Nov 14, 2009 10:34 pm Thank Helyn, it does make sense. The figure quoted in the bank paperwork stated that our new repayments were double what he had been paying. This is what threw us. I will call them on Monday as this is obviously not correct for us to be paying the whole cost of the house right now, as per their paperwork. Thanks for your advice everyone. Much appreciated. Re: Construction loan - when do you start paying? 7Nov 16, 2009 12:47 pm Hi Rowena, I would be interested to know how you went with this? Did you manage to resolve this with your bank? 12 March 2010 - Land titles received 3 April 2010 - Signed building contract 14 April 2010 - Prestart 28 April 2010 - Loan approved 30 June 2010 - Slab completed 27 August 2010 - Brickwork completed 22 September 2010 - Roofing completed 30 September 2010 - Internal walls plastered 12 October 2010 - Lock Up 19 November 2010 - PCI 26 November 2010 - Handover 29 December 2010 - Moved In https://forum.homeone.com.au/viewtopic.php?f=31&t=32584 Re: Construction loan - when do you start paying? 8Nov 16, 2009 6:50 pm aLLaNNa1 Hi Rowena, I would be interested to know how you went with this? Did you manage to resolve this with your bank? Yes, I called RAMS tonight. Apparently the paperwork they sent us was incorrect. The final fortnightly payment they quoted was what we start paying only when the whole house has been completed. The chick I spoke to said that our loan will continue as is (land only) and will only go up when the bank make a progress payment to the builder, which is what we suspected was the case. This is very good news as I thought it was strange to start paying for a house that isn't even in existence yet Mind you, we received a letter today that our loan has gone up again due to the latest interest rate rise Re: Construction loan - when do you start paying? 9Nov 17, 2009 11:14 am Thats great Rowena, glad it was sorted 12 March 2010 - Land titles received 3 April 2010 - Signed building contract 14 April 2010 - Prestart 28 April 2010 - Loan approved 30 June 2010 - Slab completed 27 August 2010 - Brickwork completed 22 September 2010 - Roofing completed 30 September 2010 - Internal walls plastered 12 October 2010 - Lock Up 19 November 2010 - PCI 26 November 2010 - Handover 29 December 2010 - Moved In https://forum.homeone.com.au/viewtopic.php?f=31&t=32584 The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19097 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35326 How much are you ahead in payments compared to where the build is at? Have you fully drawn down the loan? 5 11917 |