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You Can Thank Us Later - Reasons To Stop Thinking About Construction Loan

By Author: Mason Cattanach
Total Articles: 10

Along these lines, if you are hoping to build your dream home particularly with the continued financial assistance provided by construction loan in Parramatta, then it is the best time to do it. But, before you jump on the band wagon and obtain a loan, it is essential that you understand the loan package in detail.



What is a Construction loan?



It is a short-term, interim loan for financing the cost of building your new dream home. Lenders/credit provider will secure a home loan over the land property you are financing and they will make periodic payments to build your builder at periodic intervals as the work advances.



How is a Construction Loan Funded?



Moneylenders/credit providers have different credit policies and requirements that they adopt when processing a home loan application. However, most are similar. Below is of how moneylenders/credit providers fund construction loans:



Lenders/credit providers will fund the loan amount required by you to cover of the expense of purchasing an empty land and for the building construction costs. Before construction starts and if you have already burrowed to buy vacant land on which you are building your new dream home, the first loan payment made by the lender/credit provider will go towards paying off the empty land. Lenders/credit providers will break up the loan amount into "progress payment drawdown" amounts, which are made to the developer at the completion of each construction stage.



How is a Construction Loan Structured?



Construction loan, while it is like a traditional home loan, has some key differences. Below are some of the key features of a construction loan:



It is typically a short-term solution with maximum of one year. The borrowers will be expected to pay Interest Only payments amid the construction period. Interest is only calculated against the part of the loan amount that has been drawn down. Construction of your new home must start inside 12 months of loan settlement. Construction of your new home must be finished inside 12 months of the first progress drawdown payment.



At the point when are Progress Payments Drawn Down?



Lenders/credit providers will arrange to prepare valuations before progress payments are made to the builder and at the completion of each of the following construction stages:



For the purchase of vacant land, after the laying of the flooring, after the installation of the rooftop
At lock-up stage, and at the completion stage.



About the Author:: This contribution has been made by Jordan Allan who has written a number of articles on construction loan in Parramatta and provides fruitful information. To know more, please visit www.auswidecf.com.au.

Total Views: 148Word Count: 433See All articles From Author

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