How do Construction Loans work?

Construction loans are usually set up by the lender initially as a standard variable loan. Throughout the construction of the dwelling, there are up to 5 progress drawdowns of the loan. The first draw down is when the slab is laid, through to final drawdown when the house is finished.

The purchase of the land can be a second loan, or combined with the construction loan.

Lenders have different policies and procedures for Construction Loans. The value of a Constructed Property is mostly seen as the value of the land + the value of the Fixed Price Building Contract. The lender will use this figure as a valuation as opposed to the actual proposed end valuation.

There are many options for Construction loans, each to suit a variety of circumstances.