Financing the construction of your new home.

Building your own home can be one of life’s most rewarding milestones. Not only does a new build have the potential to save you money, but it also gives you the opportunity to design the home you’ve always wanted with all the latest fixtures and fittings.

You can also plan your finances with confidence, knowing your new home will need little maintenance or repair for years to come.

Your finance needs when building a new home can differ a little from buying an established property. Let’s explore how:

How do construction loans work?

Construction loans differ in structure from regular mortgage loans. Generally, progressive payments are made as the builder completes each stage of the project – from slab, roof and lock-up and completion.

Throughout construction, loan repayments remain interest-only (on the progressive payments made to date), keeping your repayments low while you reside elsewhere during construction. 

And just like regular home loans, you must pay a deposit and depending on the amount you borrow lender’s mortgage insurance may apply.

If you’ve already purchased the land, you will usually require a regular mortgage for the land and a construction loan for the build. The loans can be arranged separately, but are usually bundled together, particularly with a house and land package deal offered by a developer.

What else do I need to consider?

There may be government incentives available to eligible first-home buyers who build their own home. For more information check your state/territory’s rules here.

Before you commence your build, you should be careful to establish exactly what is covered for the price. There could be other expenses that you need to budget for. We recommend you have some contingency funds set aside in case of unforeseen expenses that may not be covered by your construction loan.

The construction process should also be taken into consideration. Compared to buying an existing house, building a property takes time and is subject to many factors such as inclement weather, and trade and material shortages.

Make sure you go into the project with realistic expectations and an understanding that you may have to wait a while before you can move in. If you’re building in a new housing estate, it may also take some time before features like schools and shopping amenities are completed.

Talk to us for more information

Whether you are ready to build now or in 12 months’ time, FinancePath are here to support your construction journey.

Contact the team on 1300 780 440 and we can start making construction of your dream home a reality today.