A loan for building a new home is not like your average home loan. The lender will control the release of the funds at the completion of each building stage. These stages are listed below, and your lender will provide you with paperwork to send to them at the completion of each stage.
Below is a standard progress payment table. The example here lists the figures payable if your total construction was $230,000
- Deposit / Land settlement – 5% – $11,500
- Base / Slab – 10% – $23,000
- Frame – 15% – $34,500
- Enclosed / Lock Up – 35% – $80,500
- Fixing / Pre paint – 20% – $46,000
- Practical Completion – 15% – $34,500
One month after you settle on your block of land, you will be charged interest on the amount outstanding on the loan. The interest is calculated on the daily balance, and charged monthly. This is an interest only payment, and will be charged each subsequent day of the month until the property is complete. So as each stage is completed and the progress payment is processed, the loan balance will increase.
As each stage is completed, the builder will send you an invoice which you will need to fax or email to the lender, along with the lenders paperwork that they sent you. The lender may also require proof of building insurance, which the builder will supply.
The lender will do between 1 and 5 site inspections throughout construction. This inspection is done by a qualified building inspector, and is to make sure that the building is being constructed to the council approved requirements. While the properties title is in your name, it remains the banks security until you have paid the loan off. So the lender wants to know that the building is properly constructed.