Understanding Refinancing with Bad Credit – A 10-Minute Guide
Understanding Refinancing with Bad Credit: A 10-Minute Guide Table of Contents Refinancing your home loan can be a powerful financial tool. It allows you to
If you are looking into building your dream home, chances are that you have come across the term ‘construction loan’. Loans can be confusing at the best of times, let alone when you are trying to organise a build. Luckily, Tiger Finance has you covered with everything that you need to know before you begin the application process.
Construction loans are high interest, short-term loan that are used to cover the costs of building or renovating your home. Unlike a home loan, which is usually based on the market value of the home in comparison to other recent sales in the area, construction loans are based on what the projected value of the home will be once work is completed.
If you are wondering exactly how new home construction loans work, we have outlined all that you need to know in the article below.
A construction loan is a type of home loan that are designed to help people who are beginning or in the process of building a home, as opposed to purchasing an already built property. A construction loan is typically set up as a progressive drawdown loan.
That means that instead of receiving one lump sum in the beginning, you will receive funds for each stage of the build as they happen. Generally, you only have to pay interest on the amount that is withdrawn, rather than the whole loan amount.
Once a construction loan has been approved and construction has begun on the property, lenders will usually make progress payments throughout the various stages of construction. Progress payments will typically be paid directly to the builder at the completion of each stage after you approve the lender to do so.
As construction loans are withdrawn in stages, interest is normally paid based on the funds used so far. For example, if by the third stage of construction, only $100,000 has been withdrawn on a $200,000 loan, then you would only pay interest on the $150,000 amount.
There are many types of construction loans though, and it is important to know which you need before you begin the process of applying.
Construction to permanent loan
In a construction to permanent loan, the money is typically drawn out in stages as the build progresses. Instead of receiving one large sum at the beginning of your build or renovation, you will receive what is needed to lay the foundation, and then put up a frame, and so on. These loans are ideal if you have a definitive timeline and construction plan to follow.
Renovation loan
A renovation loan is for you if you have purchased a property that needs major work completed on it. This type of loan is generally smaller in value, as the cost of renovations are significantly less than those of building from scratch.
Owner builder construction loan
Owner builder loans are when the borrower also acts in the capacity of the homebuilder. Most lenders do not allow this type of loan, due to the complexity of construction and the understanding of building codes. Lenders that do allow this loan generally need the borrower to be a licenced builder.
Construction only loan
This loan is to provide the funds necessary to complete the building of the property and must be paid off in full once building has been completed. The funds from these loans are dispersed based on the percentage of the project that has been completed, and the borrower is responsible for covering the interest payments on the amount drawn.
End loan
An end loan is another name for a mortgage. You will probably need this loan after construction has been completed.
Off the plan loan
An off the plan loan is where a developer has a pre-approved plan to construct an apartment complex. To ensure a quick sale on completion, the developer will offer the apartments for sale before construction has begun. This means that the balance of the purchase price is paid when construction has been completed.
With Tiger Finance, we can help to get you a hassle-free construction loan. You will have a free consultation with one of our specialists, and we will tailor-make you a loan. We will negotiate with lenders on your behalf before you are approved.
We have helped countless Australians with both good and bad credit ratings to be funded for their dream build. We understand that lending criteria from other lenders are too strict, and can stop you from achieving your goals. That is wrong, and it should not hold you back.
Our finance specialists can help you find the right construction loan for your project. Construction finance is a complicated topic, and that is where Tiger Finance can help. We will find a loan that makes your dream project that much easier.
If you are one of the many Australians finding getting a construction loan difficult, Tiger Finance can make the process simple and pain-free.
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Our vision is to make it simple and easy for every Australian to get the funding they need to achieve their big life goals.
National Home Loans Group Pty Ltd trading as Tiger Finance | ABN 57 168 971 346
Tiger Finance Credit Representative: Kiara Patricia Halley | Credit Licence: 468465
*Interest Rates: Conditions, fees and charges apply. Interest rates are subject to change and will vary. We cannot guarantee that the interest rate advertised on our website will be the one offered to you. Interest rates offered will be dependant on your situation.
*Consolidating high-interest personal loans and credit cards into a lower-interest home loan may result in significant savings on interest for some consumers. However, this solution may not be suitable or accessible to everyone.
*The approval timeframe is varied. Approval time is subject to change depending on your circumstances or loan type. Processing times may be subject to your lender.