Construction loans

What you need to know before applying for a Construction Loan

If you’ve considering renovating your home, or even build a new one from scratch, you’ve probably crunched the numbers and seen that financing such work could leave you vulnerable if something went wrong, or an unexpected bill came through. You may even have realized that paying for your project isn’t possible without the help of a cash injection from a bank or financial institution.

If that sounds like you, a construction loan may be the perfect way to realize your building dream, without leaving your balance sheets exposed, or bank balance vulnerable.

To find out more about these loans, and to discover whether or not they’re suitable for you, read on.

Construction loans are a short-term, interim loan, designed to help you finance the cost of your renovation or build-from-scratch project. Construction loans are most commonly used by those looking to purchase land and build their own home from the bottom up, but can also be suitable for certain types of renovation projects, should eligibility be approved.

Construction loans are usually offered by banks and financial institutions, so like other loans, will vary when it comes to acceptance rates, loan amount and interest repayment rates.

A construction loan works similarly to most other types of credit advance. However, with a couple of small differences. Instead of receiving a large, up front sum of money, you’ll receive it in stages, depending on competition of the designated work on budget.

In certain circumstances, your lender will pay your bills for you, meaning you’ll never even have to handle money. Whether your loan will work on a bank-to-builder system or a voucher scheme depends on the type of contract agreed upon. Either way, building work will be funded in a timely and reliable manner, meaning your project can continue without interruption.


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Construction loan process

More information about the construction loan process and how it works.

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