Construction loans | Mortgage Broker in Hurstville, Penshurst, Mortdale
Start your home loan journey today
Construction loans and how they work
When you’re looking to build or renovate a property, financial support is more than likely required. Construction loans are designed to provide financial support in stages, to ensure that any construction project doesn’t lose momentum.
Construction loans are unique in that, rather than providing a single large loan amount, the loan is split into stages and disbursed at certain intervals to align with project management. As such, construction loans are flexible and can be suited to accommodate any project, whether it’s a kitchen renovation to a whole home reconstruction.
When you’re ready to transform your property into your dream home, be sure to reach out to Pramod Dhakal, you’re local mortgage broker for Hurstville, Penshurst, and Mortdale.
Why are construction loans paid in instalments?
Construction loans differ from typical personal loans and home loans, as rather than being paid to the borrower in one large sum, it is split up into instalments to accommodate a project plan. Project plans are roadmaps that outline the steps of a construction project, from conception to completion. It not only provides the blueprint for how a project is to be completed, but also acts as a guide for stakeholders to instil confidence.
The reason that construction loans accommodate project plans is to decrease the total amount of interest required to be paid by the borrower. Rather than the borrower paying interest on the total loan amount, they only have to pay the interest on the instalment amounts.
For example, let’s imagine you are approved for a construction loan totalling $150,000 and your first invoice for your construction project is $30,000.
By drawing $30,000, you are then only required to pay the interest on this amount.
Should the entirety of the $150,000 be lent at once, you would be required to pay the interest on the full amount.
By breaking up the total amount borrowed to align with the stages of your project plan, construction loans allow you to budget more effectively throughout your project. If you’re interested in your next construction project, get in touch with your local mortgage broker, Pramod Dhakal, today.
To ensure your next construction project runs smoothly and doesn’t break the bank, contact Pramod on 0401 031 136.
Pramod is also able to assist with other aspects of the property market, such as:
