From assisting with a major cosmetic upgrades to finance for the construction of multi-dwellings on one title and everything in between, we have an experienced team with a full panel of construction lenders
What types of construction can I finance?
- Fixed Price Build Contracts – These are the most comment & the easiest and most supported construction type
- Equity release against existing property – If you have enough equity in other property you can secure a cashout loan
- Owner builder finance – Can be done and we have solutions however certain restrictions apply (read below)
- More than 4 dwellings on one title – This is generally classified as commercial finance (we can still assist but it won’t be a residential loan)
Will I get approved?
- Lenders are a little more hesitant to lend on construction finance (due to the extra risk) so we need to collect more information from you
- You need a clear credit file and a perfect repayment history on existing/previous debts
- Location restrictions apply (banks prefer capital cities, major towns or regional centres).
- You need to have stable employment and a regular income.
Interest rates from:
2.69% | 2.86%* p.a (Comparison Rate)
During the construction period only (reverts to a lower interest rate post construction)
Lenders available :
Mainly Specialist lenders and a handful of major lenders under certain conditions
Discover if you qualify :
We can help you with constructions loans anywhere in Australia
I haven't even bought the land yet, can I still get approved?
Yes you can.
It’s actually quite common to bundle both together and put an application into the bank to purchase the vacant land plus the construction.
If you’ve found the land and it’s pending title registration or you can cleverly negotiated an extended (3-6 month) settlement period then this will give you ample time to engage a builder and begin arranging the building plans, inclusions and the building contract.
There are also a few hidden benefits of doing it this way:
- Lenders look favourably on putting both together – they get to see your overall plans with the land and your intentions to build straight away which is a positive sign (as this adds value to the property and can then be rented out once completed).
- Some lenders don’t lend for vacant land only – in a similar vein to the above, vacant land is more risky as it does not hold as much sale value as a completed property and provides no cashflow return
- You can secure sharper interest rate packages – As you’ll be borrowing more to finance both we can secure an overall cheaper interest rate deal
- Lower holding costs – Building straight away lowers your holding and interest costs rather than settling on the land first and then arranging construction
What's needed for an approval and to get started?
You’ll need a good idea on the following areas:
Location you are looking to build
General cost for the land (if you haven’t purchased already)
What you are looking to build and the estimated cost
Other costs you’ll potentially need to finance (demolition, DA costs as an example)
Once you have a firm idea on the above, we will be able to assist in looking at your best available lending solutions
What are the options for owner builder loans?
In recent years, owner builder loans have tightened up significantly amongst the big banks due to the increased risk and the history of owner builders getting into financial trouble during the build process!
Banks were finding that there was a historical pattern of owner builders going over budget on the construction plan and a higher risk of them not completing the project
If you are looking at owner builder options you’ll most certainly be needing a specialist lender (of which we have a number of options).
In order to even have any funding options however, you’ll generally need to meet the following broader criteria:
Excellent credit file (no blemishes and good repayment conduct on all existing facilities)
Borrowing at no more than 65% of the land plus construction cost (if you aren’t a licensed builder)
Borrowing at no more than 75% of the land plus construction costs (if you are a licensed builder or will have a licensed builder invoicing for the work completed)
Be in a position to provide more detailed planning documents (building plans, itemised cost estimate, owner builder permits, licenses and insurances)
Do I need a Fixed Price Build Contract?
It depends on how easy you’d like your finance application to be!
In a challenging credit environment where lenders are scrutinizing every aspect of an application and sometimes looking at ways to decline applications rather than approve them then yes we strongly suggest going with the FPBC (Fixed Price Build Contract) construction method.
It obviously not only strengthens your funding options but it also provides you with a higher level of risk minimisation to ensure there is a contract in-place to ensure that you do not go over budget and it also sets a specific timeframe to completion (as holding costs can be a large financial burden during the building period).
Why is the interest rate higher on construction loans?
We have secured rate discounts with many lenders for construction loans however generally speaking the interest rate will be slightly higher than a like-for-like term loan (non construction) during the initial building phase.
This is due to the following reasons:
Slightly higher risk to the lender during this critical phase (first 6 – 12 months)
There is additional inspections required at each progress payment stage (which takes time)
There is additional processing for the bank to complete to pay invoices for you
It’s important to note that the interest rate is always important but not critical to finding the right construction loan solution as it’s generally such a short timeframe (12 months maximum in most cases).
Once you’ve completed the construction phase, your broker at Cornerstone Lending will check in with you and re-assess the best options for the loan moving forward post-construction (whether to stay at the current bank and switch products if necessary or move banks).
Applying for a construction loan.
If you’re interesting in securing a construction loan approval and would like the right advice, please speak to us!
We’ll give you a thorough overview of your position and the most competitive options available to you in the market.
Complete a Free Assessment Form to get started with our team today.