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 planning on building your dream home, you have probably already begun to research housing finance and the loans that you’ll need in order to build. The most vital piece of funding that you will need is a construction loan. Being approved for one of these will enable you to fund your build, and cover any potential hurdles that you could come across while construction takes place.
When you are applying for a construction loan, it is important to be aware of the interest rates that can go along with them. That’s why we have put together a guide for you below.
If you are approved for a construction loan, the interest rates that you will get are different as the payment will not come as a lump sum.
Instead, you will only pay interest on the amount that you have withdrawn. However, there are some instances where construction loans can incur higher interest rates than usual. If you are wondering how interest rates work on a construction loan, look no further.
A construction loan gives you the money that you need in order to build a home. Unlike a standard mortgage, the term on a construction loan only lasts for the duration of time it takes the building process to be complete—usually one year or less. Once the construction has been completed, you then transition to a mortgage.
Compared to finding a mortgage to buy an existing house, applying for a construction loan can potentially present a number of hurdles. Requirements can sometimes include higher credit scores being needed, bigger down payments and proof of a detailed project plan in order to move forward.
As construction loans are progressively drawn throughout the building stages instead of in one lump sum, interest is normally calculated based only on the funds used so far. That means that if you have a $400,000 loan and you have only withdrawn $80,000 so far, you’ll only be charged interest on that $80,000 amount instead of the full sum.
By making progress payments in the form of your interest payments rather than paying a lump-sum up-front, you’ll be protecting yourself against financial loss. You will also be able to ensure that the work is completed to a satisfactory standard before you provide the builder and construction team with any more funding. This makes it easier to make sure any problems that come up are solved as they happen, rather than having a list of issues to fix at the end stage of construction.
Valuations can be performed by your lender at any time during the build to make sure that no corners have been cut in the building process itself, and that the build is continuing according to both plan and schedule.
This is done to reassure the lender that everything is moving ahead as it should be and that there won’t be any setbacks when it comes to the loan repayment.
Most construction loans available in Australia are interest-only for the duration of construction so that while your home is being built, your costs are kept to a minimum. After this period, the construction loan will revert to a home loan.
It is completely up to the lender on what interest rate they may decide on, though additional fees do tend to apply. Typical fees for construction can include additional valuation fees during construction.
However, construction loans can often attract higher interest rates, so it’s important to do your research before signing a contract so that you don’t end up paying more than you need to.
Although construction loans are not always the cheapest home loans, there are still many competitive interest rates available. Typically during the construction, the interest rate will be slightly higher, but it then reduces when the work is complete.
With Tiger Finance, we can help to get you a loan in four easy steps. You’ll have a free consultation with one of our specialists, and we will tailor-make you a loan. We’ll negotiate with lenders on your behalf before you’re approved.
We’ve helped countless Australians with both good and bad credit ratings to get 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 shouldn’t hold you back.
Our finance specialists can help you find the right construction loan for your project. Construction finance is a complicated topic, and 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. Call us today to get started on your dream build!
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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.