Construction Loans in Melbourne – 7 Mortgages

A construction loan is a short-term financing option designed to fund the construction of new properties – both residential and commercial. Unlike traditional loans, these loans are disbursed in stages as the project progresses. At 7 Mortgages, we help you find construction loans in Melbourne that match all your funding needs. This includes competitive rates and flexible terms to ensure your building project is on track. Whether you’re building a new home, expanding your business, or investing in property development, our team is here to guide you through the entire process.

How Does a Construction Loan Work?

While construction financing works similarly to a standard home loan, there are key differences due to the nature of the project. Unlike a traditional mortgage, which provides a lump sum, here, funds are released in stages through a process called “progressive drawdown”. These are some points you’ll need to consider:

• Each drawdown is based on a percentage of the total building contract. You only pay interest on the amount you’ve “drawn down”.
• Typically, a construction loan is paired with a land loan to finance both the land purchase and construction costs. As part of the application, the lender will request a builder’s fixed-price quote with a breakdown for each stage.
• The lender also conducts an “as if complete” valuation to assess the estimated market value of the land and the proposed building before approving the loan.
• During construction, you can make interest-only payments based on the construction loan rates. Once the project is finished and you receive a certificate of occupancy, the loan converts into a standard mortgage.
• Most lenders allow up to six months to draw from the loan, with construction typically completed within 12 to 24 months.
• For best results, aim for a 20% deposit, although approval with a smaller deposit is possible with additional fees.

Types of Construction Loans

Loans for construction projects come in various types. Depending on what your needs are, 7 Mortgages will find one that fits your requirements. Here’s a quick overview:

• Land Loans:

  Used to purchase a plot of land before building begins.

• Construction-to-permanent Loans:

  Converts to a traditional mortgage once construction is complete.

• One-time Close Loans:

  Combines the construction and permanent financing into one loan with a single approval process.

How to Apply for a Construction Home Loan?

Applying for home building loans is easy if you have the right help. Our team can make the entire process hassle-free by providing the right guidance. This is how you can proceed:

• Research Lenders:

  Compare different lenders, including banks, credit unions, and online lenders. That way, you can find the best construction loan interest rates and terms. You can also consult our brokers for advice.

• Prepare Documentation:

  We’ll tell you what necessary documents you need to collect, including proof of income, tax returns, a construction plan, and an estimated budget for the project. You may also need architectural plans and contractor information.

• Submit Your Application:

  Our team helps you complete and submit the loan application along with the required documents. The lender will review your financial standing, project details, and approve or deny your request based on their criteria.

Contact Us for Expert Guidance on Construction Loans

For expert assistance with construction loans in Melbourne, get in touch with 7 Mortgages. We’ll provide tailored mortgage solutions that satisfy all your needs. Our team is ready to guide you through every step of the process. For personalised advice, call us on 03 9544 2642 / 0413 277 413, or email us at admin@7mortgages.com.au. Let us help you achieve your construction goals with the right financing options.