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Construction loans allow borrowers to borrow the final estimated cost of the property, and pay interest only for the initial construction period.
Using estimates and tenders from builders, along with council approvals, your lender will calculate the final building costs and agree on a loan amount. You draw the money as and when you need it, usually as each major stage of the construction is completed. The loan is interest only during the construction phase, and you only pay interest on the amount of funds you have drawn, rather than the whole loan amount. You can also make early repayments should you wish to. Once the property is complete, the loan reverts to a principle and interest loan. A construction loan can offer many benefits to borrowers wishing to design and build their own home, as it offers an affordable way of borrowing the funds necessary for the task.
However, because you pay interest only you are not paying the principle part of the loan, therefore once construction is complete, you will find that you have not paid much of the loan total. And, the loan is variable rate therefore if interest rates go up, so will your loan repayments.
First Home Buyer Grant
In October 2008, the Federal Government announced increases to the First Home Buyer Grant but it is now due to be reduced as of 31 December 2009. The original first home owners grant of $7,000 is still available to eligible first home buyers after this date.
The grant was boosted by the Federal Government during the global financial crisis to boost the property market but is now winding back to the original $7,000. The grant is designed to help first home buyer onto the property ladder.
To find out if you are eligible for this loan visit http://www.firsthome.gov.au/
Talk to a local mortgage broker and find out how you can get a construction loan with a great rate. Call  .
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