Basically, a construction loan is like a really large line of credit loan that helps you pay for your build as and when you need funds. Once the build is complete, your loan then reverts to a regular home loan.

Say the cost of building your new home is going to be $600,000, and you’re currently paying an existing mortage on your old house of $350,000. The last thing you want is to go into debt for $950,000.

This is where a construction loan helps – you are able to arrange finance for the cost of your new build, but the full amount isn’t drawn down all at once from the get go. As your build progresses, and you’re able to sign off on a certain phase of it, you can draw down only the money you need.

So, after 3 months of your build, you may be ready to draw down only $50,000 of the total build cost of $600,000. A construction loan lets you do this.

As each of the phases of your build are completed, you draw down only the funds you need to pay your builder & suppliers.

What this means is that with an interest-only construction loan, you only complete a draw down and start paying interest on the drawn down amount once you’re completely satisfied that all work that was agreed upon has been completed. To complete a draw down, we’ll ask you for things like builder’s invoices and a progress claim certificate.

Once your build is complete, we’ll try to make things as smooth as possible so you can kick start the celebrations.

For new builds, we’ll just need a copy of the occupancy certificate to release your final loan draw down, and then your loan is ready to revert to a principal and interest loan product of your choice – a Greater Bank lender can help you decide which loan type best suits your needs.

Once that’s done, and your new repayments take effect, it’s party time!