Building your own home has never been so popular. This is partly due to the ever-increasing cost of buying a home. But it also provides you with the opportunity to create something unique, personal and a home that fits your exact needs.
It can also be the best route to take if you are intending to build a home that is environmentally friendly.
Unfortunately even building your own home will cost money. If you don’t already have any then you need to source the appropriate finance. You’ll quickly realize that a standard mortgage will not be possible.
The Right Broker
You need to find a broker that specializes in construction finance. Specialists such as stornowaycp.com.au will be able to guide you through the process and help you to get the best possible deal.
It is important to be aware that you will need to have a good level of credit in order to qualify for a construction loan.
How The Construction Loan Works
A construction loan is more risky for the lender than a standard mortgage; there is nothing to secure the funds on. With a traditional house purchase the mortgage firm can repossess the house and sell it if necessary; this is not an option if the house has not yet been built.
It is therefore usual for them to require a 20% deposit from you. This can be used to purchase the land, get the plans in order, obtain permission and even start the foundations.
The finance company will then release the funds in stages; there are usually 3. Each release of funds will correspond with the start of the next stage of construction; foundations, building the external structure and finishing off.
This helps to reduce their risk; allowing them to lend you the money you need.
It is important to note that on completion of the property it is normal for the finance company to expect their funds back, with interest, within a year. At this point, if you are planning on keeping the property you’ll need to obtain a conventional mortgage.
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Other Ways To Finance Your Construction Project
The above method is probably the best, it is legally enforceable at every step of the way and because it is becoming more popular relatively easy to get the funding.
However, if this is not an option you could try one of these methods:
Family & Friends
If your family or friends are fortunate enough to have a sizeable amount of capital behind them then you may be able to borrow the funds you need from them.
However, you must be careful when borrowing funds from those close to you; it can destroy the relationship.
If you already have a property then you can remortgage it to get all or some of the funds you need for your construction project.
This allows the lender to have something to secure the loan against; making them more comfortable with lending and the finance easier to get.
If you’re looking at constructing your own home through an established large building firm it is very likely that they have their own finance deals they can offer you.
But, as with any finance; make sure you check the fine print.