OAKBURY FINANCIAL GROUP is an authorized Representative of AFG Ltd ACN 066 385 822
Australian Credit Licence: 389087
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Building a home can give you the freedom to get creative and design a property that is tailored to your needs, style and budget.
There are 2 main types of properties when it comes to construction…
Requires the bank to fund the loan at the time that the property is fully completed
Requires a Construction Loan that progressively gives you access to money as different stages of the house are completed. This is referred to as Progress Payment.
Note: When it comes to the word “construction”, it can be confusing as it can be referring to two particular types of properties.
An off the plan purchase occurs when you buy a property before it has been built or completed. This purchase typically involves buying a property in a development that hasn’t yet been built, such as apartments, townhouses, duplexes or house-and-land packages. You primarily buy into an existing plan and pay a deposit before the construction begins.
Once the property has been fully built and completed with the council’s occupancy permits, you can settle and move into the property.
As advised by the developer, an initial deposit of 5-10% of the contract price must be paid and contracts are signed to secure the property purchase.
The developer will proceed to build the property and once the property is nearing completion, you will be advised of an upcoming settlement date and asked to obtain your finance approval.
Once your finance is approved, the settlement will take place and your home loan repayments will begin on the settlement day.
The land contract will be between the buyer and the land developer for the purchase of a vacant block of land.
The building contract will be between the buyer and a builder for carrying out and completion of building works.
Initial deposits will be required for both the land and the construction, the deposit amount will vary from land developers and builders and they can be as little as $2000 and up to 10% of the contract price.
An indicative land titles date will be provided and unconditional finance approval must be obtained for both the land and construction before the land settlement due date.
The land loan repayment will commence from the day of the land settlement.
The construction loan will be progressively paid via progress payments.
Once the construction loan has been unconditionally approved and is ready to be drawn down for the construction payments, the loan will commence with a zero balance owing.
The builder will issue an invoice for each stage of the construction as per the progress payment schedule in the building contract once it has been completed. Usually, this is over 5 stages, including Slab, Frame, Lock-Up, Fit Out and Completion.
Once the buyer has issued and approved an invoice, the bank will pay this invoice to the builder.
Once the invoice is paid, the construction loan will be drawn down.
For example:
Base invoice $30,000 > paid by bank > construction loan increases from -$0 to -$30,000 balance
Frame invoice $50,000 > paid by bank > construction loan increases from -$30,000 to -$80,000 balance
The repayment of the construction loan will increase slowly as the loan balance increase.
All repayments for the construction loan will be interest only while it is under construction and will revert to principal and interest repayments upon the completion of the construction.
Just pick up the phone and contact us and we can walk you through the process and get you started!
| More time to save your deposits |
| Purchase price may be lower than that of a completed property |
| Initial deposit to be paid to the Developer and the remaining balance on completion |
| Higher tax deductions available on new properties |
| First Home Buyers will be eligible for the $10,000 First Home Owner Grant |
May need to pay rent while your house is being built |
Development may be delayed therefore settlement date will also be delayed |
The finished product may be slightly different from what was originally offered |
Banks will not approve lending until the property is fully built and completed |
| Able to choose the layout of the house |
| Freedom to build your home in your chosen location |
| Ability to customise colours and designs |
| Your home will be brand new |
| The bank will approve both your land and construction loan before your land settlement |
| Higher tax deductions available on new properties |
| First Home Buyers will be eligible for the $10,000 First Home Owner Grant |
| Full stamp duty is waived |
May need to pay rent while your house is being built |
You will need to make land loan repayments while the property is being built |
Construction loan repayments will also apply once construction commences (although construction loan repayments are interest only and will be relatively low throughout the construction period) |
Give us a call today or book a chat and we will contact you at a time that works for you! The best time to get started on your Finance…is now.
OAKBURY FINANCIAL GROUP is an authorized Representative of AFG Ltd ACN 066 385 822
Australian Credit Licence: 389087