Construction Loans | Mortgage Broker in Coolum, Yandina, and Nambour
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What are construction loans for?
When you take up the task to build, repair, or renovate your property, it’s important to have two things at the ready: a detailed project plan and funds to get the job done.
Construction loans are designed to deliver sustained funds to individuals as they build or renovate a property, following a project plan. Construction loans offer a unique approach to lending that personal loans are simply not able to do.
To ensure that your next project is funded as smoothly as possible, reach out to your local Sunshine Coast mortgage broker, Michael Smith, today.
How are construction loans different to personal loans?
Typical loans deliver one large sum to the borrower, which is typically used for a large, singular purchase such as a property. Construction loans, however, take a different approach. Rather than one large sum amount being lent to the borrower at once, the total amount is agreed upon and then delivered in instalments to the borrower to accommodate the different stages of construction.
This is beneficial for both the lender and the borrower, as the borrower doesn’t have to pay the interest rate on the full agreed-upon amount, only the amount that has been delivered. Lenders then also enjoy the security of this incremental payment structure, as should the project halt for whatever reason, the lender still has the majority of the loan in their pocket.
To provide an example, let’s imagine you have a construction project that requires $100,000 to complete, and has 5 steps to complete, all of which cost $20,000 according to your project plan.
A lender will provide a construction loan of $100,000 with 6% interest.
As step 1 of your project plan is set to begin, the lender provides you with $20,000 of your loan.
During this time, you make your first repayment amount. The amount to be paid reflects what was agreed upon with your lender, plus 6% interest for the $20,000 lent.
In the scenario where the full $100,000 was lent, you would be made to pay 6% of the $100,000, even though only $20,000 is required for step 1 of your project.
If you’re unsure how to develop a project plan, or how to navigate your loan options to accommodate your project plan, reach out to you local broker, Michael Smith, to discuss what your options are.
To find out how your next project can be funded without having to break the bank, reach out to Michael Smith, the Sunshine Coast’s favourite mortgage broker, on 0489 012 080.
Michael is experienced in all areas of the property market, and can assist with navigating:
