Jun 24, 2020 1:02 am
We're about to start a KDRB process and trying to wrap our head around what this means for our finances and loan structures.
From others experiences with construction loans, what banks have you recently signed up to with good construction loan rates and land loan rates? We've been advised by our mortgage broker that the best way to structure our loans is:
- close our current home loan with ANZ and move to CBA
- take out a Construction loan (interest only) for the house build amount
- take out a Land loan for the portion of our land (which is principle and interest with no offset feature)
Our question is, with the Construction Loan, have others included the costs of demolition, landscaping etc in their loan as well and does that mean you need to obtain quotes beforehand to include in the HIA contract?
If things like demo and landscaping are also included in the HIA contract to form part of the construction loan, is the start date of this loan when the first payment for demolition is required and end date when landscaping is all done? As Construction Loan interest rates are higher than land loans or standard home loans, (and we have the cash to pay for these upfront) is it better to not include in the Construction Loan?
We're just trying to understand whether from peoples experiences with construction loans and HIA contract, should we include those items not provided by the builder in the construction loan or pay with our own cash? A goal of ours is also to have a good amount of cash post build to put back in an offset account once the loans are then combined and converted into a Standard Home Loan again.
Hope that makes sense!
Re: Construction loan advice2
Jun 24, 2020 7:51 am
Why no offset? Is that by chosen package?
And construction loan interest rate is higher? I didn’t think it was with CBA but not sure on that, they’re not my preferred choice - no doubt there’s a reason the broker gave you for this choice. It might be any number of things.
The construction component starts when the first invoice is claimed - demolition most likely, and can end when final handover occurs depending on what % you’re borrowing. Sometimes you can’t release the final funds until you have the final pieces in place - regardless the difference is days or weeks and not huge.
Property crazy expert mortgage broker, love building new homes!
Two Red Shoes mortgage broker
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