Construction loans are a little different to a normal home loan as there are additional decisions to be made and documentation that is required.
Further documentation will also be required before the first payment is made from the lender to the builder. Documents will including a schedule of the payments to be made (called drawdowns), the builders’ insurance details and the final plans that have been approved by the local council.
For the lender to make each payment to the builder, you will need to fill out a drawdown request form from your lender and submit it to your builder. The builder can then send the lender your form with an invoice for that part of the payment and, after the lender is satisfied that the work has been completed and is up to the standard expected in the valuation, the drawdown can be completed with a payment to the builder.
It is important that are happy with your plans and contract prior to obtaining finance as any changes to the contract and plans can trigger a reassessment of the loan. With this in mind, it may be worth trying to pay for any small amendments from your own pocket, rather than changing the loan and risking a reassessment.Building your dream home can be a complex process that involves multiple parties. Getting your construction loan approved doesn’t have to be as complex if you work with a mortgage broker. Talk to us today for more information.