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New Construction Home Loans in Australia

Are you finally ready to build your dream home from scratch? Or perhaps you’re eager to expand your existing home to cater for a growing household. Whatever your motives are, a construction home loan might be the ideal solution.

Construction loans are great for first home buyers who don’t just want more control over the home they move into, but more control over their financing situation as well. The flexibility of progress payments allows for self-managed cashflow, minimised interest and more flexible conditions.

Progress payments explained

When building a home, your chosen registered builders will charge you for their services in stages. Typically, these progress payments are structured in the following way:

  • Preparation (plans, permits, connection fees, insurance and other necessary paperwork)
  • Base (laying the concrete slab, footings, pad and base brickwork)
  • Frame (completion and approval of the house frame)
  • Lock-up (installation of windows and doors, roofing, exterior and insulation)
  • Fixing (this includes components like kitchen cabinetry, appliances, showers and toilets, as well as all the plumbing and electric work, plastering and painting)
  • Completion (fences erected, all construction debris removed and finishing touches applied)

While most banks and lenders offer construction home loans, there are lots of prerequisites and conditions that need to be met in order to be eligible.

There are two common ways to go about building a house in Australia – buying the land first and then building a property on it, or buying a house and land package. This affects which construction home loans you’re eligible for. In the points below, we’ll walk you through the process so that you have a better idea of whether a new construction home loan is the right avenue for you.

Home construction loans: Buying then building

  • Take out a standard home loan to buy a block of land (most lenders will lend up to 90% or even 95% of the land purchase price).
  • Given that you’re likely to still be renting somewhere at this stage, you can usually opt for interest-only repayments while your house is being built.
  • Find a suitable builder, decide on a home design, and agree on a fixed price building contract (a document that includes the plans, specifications, guidelines and price of your home construction).
  • The total cost of your home construction will typically be broken down into 3-6 process payments – one for lying the concrete slab (for example), another for building the walls and roof, and so on.
  • Your home loan is initially just for the land, and then increases with each progress payment (i.e. the lender is paying the builder for these progress payments, and this is being added to your loan).

Construction home loans: Purchasing a house and land package

As the name suggests, this is where you know the exact lump sum figure for buying the land and building the home, because it’s all purchased together.

If you’re a first home buyer with the intention to live in the home you are building, there’s a good chance that you’ll be eligible for the Australian Government’s First Home Loan Deposit Scheme (New Homes) Guarantee – this scheme allows first home buyers to secure a loan with just a 5% deposit.

Learn more about new construction home loans, with BFG Loans

Our expert brokers can help you navigate the process of finding the right construction home loan for your individual needs and circumstances. We work with a vast array of reputable financial institutions and lenders to secure tailored loan products for our valued clients – be it a construction loan, first homebuyer finance, owner-occupied loan, guarantor home loan or otherwise. Get in touch to arrange a consultation with our friendly experts today.

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