HOW DO I GET A LOAN FOR BUILDING MY OWN HOME?
So the houses you have been looking at don’t tick all the boxes or you just want something that is especially yours.
Obtaining approval for a new home build loan is similar to buying an established home however the process during the build is a little different.
It’s important to us that you’re have the right knowledge upfront and know what to expect. With access to a plethora of construction loan options, we will have a number of suitable options that will help to take the stress out of building.
In particular there are a few things to be aware of:
- Lenders control payments to your builder through progress payments
- Variable rate loans are typically favoured by lenders during the build but fixed rate options are available
- Repayments are normally interest only during construction
- Valuations are typically required before and after build completion
SOME OF THE MOST COMMON QUESTIONS OUR CLIENTS ASK:
Generally the lenders will ask us for the following items however before our first meeting, we’ll talk you through everything that is required so you have plenty of time to get organised:
- Proof of income (pay slips)
- A deposit backed by a proven savings history.
- A good credit history (we can still help if you don’t)
Most lenders ask for a 5% deposit of the property value but if you have saved more that’s great as it makes borrowing from the banks and lenders even easier. You also need to factor in purchase costs such as stamp duty, conveyancing and the potential impacts of lenders mortgage insurance (LMI). In general, the more you have saved, the more options you have and the easier the approval process becomes.
We have a calculator to help indicate how much the lenders will likely lend you however we will personally assess your situation and be able to provide you with a more exact figure. General speaking, the more money you earn and the less debt you have, the more your capacity to borrow will be. Each lender will be slightly different.
If you’re building or buying a new or substantially renovated home, you may be eligible for the first home buyer grant. There are several factors that determine your eligibility and each Australian state and territory can be different. See our first home buyers page for additional information.
The purchase price of your home or vacant land will dictate whether you qualify for the stamp duty waiver or concessional rate. See our useful links and blog section for more information.
This will vary depending on the lender you choose, the purchase price of the property, the deposit you contribute and so on. Once we have more information about your loan requirements and intended property purchase, we’ll be able to provide a realistic figure for expected fees and charges.
Lenders Mortgage Insurance (also known as LMI) is a fee charged by lenders, when your deposit is below 20% of your property’s value. It can be a big hurdle, but most lenders will add it to your loan, so you don’t have to save up for it and we may be able to help you avoid this cost altogether.
Loan to Value Ratio (LVR) is the amount of money you wish to borrow in comparison to the value of your property. So, if you want to buy a house valued at $500,000 and you a have a $100,000 deposit, your LVR would be 80%. Most lenders adjust their interest rates relative to the LVR and have specific ratios to which they will lend to.
A variable interest rate is a changing loan interest rate that fluctuates at the banks discretion usually in line with market interest rates. As a result, your payments will vary as well. Fixed interest rate means the interest rate will stays the same for the period of the loan – and so will your repayments. You can fix your rate for a particular period of time, normally between 1 and 5 years, and is beneficial when interest rates are on the increase or want certainty over repayments.