Construction Loan

on the Sunshine Coast

Construction Loan on the Sunshine Coast

Need a loan to build a new home or investment property?

If you need help with financing your new home or investment property, you might want to consider getting a construction loan. Whether you are a property developer, a commercial builder or just looking to build your own home or renovate it, SCF Solutions can help you throughout the construction loan process.

And no matter where you are in the property cycle, the right loan and structure can make all the difference.

A trusted construction loan broker provides you with the best rates and terms for construction loans so that your project can be completed on time.

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Table of Contents

What are construction loans?

Construction loans are loans to build a house or to renovate it. They are alsos typically used by individuals, developers, and businesses to build or renovate residential or commercial properties.

Construction loans usually have a shorter term than traditional home loans, ranging from six months to two years.

How do construction loans work?

Unlike traditional home loans or mortgage loans, construction loans are typically released in stages or “drawdowns” as the construction project progresses. This means that the borrower does not receive the full loan amount upfront, but rather receives the funds in installments as certain milestones are reached in the construction process, such as completion of the foundation, framing, roofing, etc.

Once the construction is complete, the borrower typically converts the construction loan into a traditional mortgage or pays it off in full.

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Why are rates for construction loans higher than a standard mortgage?

Construction loans are considered riskier than standard mortgage loans because the property being financed does not yet exist. Many things could happen during the construction project, e.g., cost overruns, construction delays, or the property not being completed on time or to the required standards. The disbursement structure pf construction loans may also carry some risk for the lenders, that’s why lenders charge higher interest rates to offset these additional risks.

Construction loan rates also tend to be higher because the term is shorter.

What can you use a construction loan for?

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Build a new home

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Renovate an existing property

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Knocking and rebuilding

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Developing a property

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Commercial construction

What is the best loan structure for construction loans?

The below are the most common loan structures for construction loans that you can select based to fit your personal circumstances best:

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Progress payments

Your lender will release funds to you at different stages of the construction process, such as when the foundation is poured or when the roof is installed. This will help you ensure that you have the funds you need to complete each stage of the build.

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Interest-only payments

With an interest-only loan structure, you’ll only be required to make interest payments during the construction period. Once construction is complete, the loan will typically convert to a standard principal and interest home loan.
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Line of credit

A line of credit loan structure allows you to draw down funds as you need them, which can be useful if your construction project is more complex or if you’re working with a custom builder who may require more flexible financing.
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Construction to permanent

Your loan will start out as a construction loan during the building phase, and will then convert to a permanent home loan once construction is complete.

How do we efficiently draw down a loan for
construction?

Efficiently drawing down a loan for construction requires careful planning and communication with your lender. Here are some tips to help you streamline the process:

Create a detailed budget and timeline

Have a comprehensive budget and timeline for your project. Determine all estimated costs, including materials, labour, permits, and fees, as well as a realistic timeline for each stage of the construction process

Work with an experienced builder

An experienced and reputable builder can help you stay on track and within budget, and can also help you avoid costly mistakes or delays. Your lender may also require you to work with an approved builder or contractor.

Stay in communication with your lender

Throughout the construction process, keep your lender informed of your progress and any changes to your budget or timeline. This can help ensure that your loan funds are released in a timely and efficient manner.

Submit all required documentation promptly

Your lender will likely require documentation at various stages of the construction process, such as building plans, invoices, and proof of insurance. Submit these documents promptly to avoid delays in the loan drawdown process.

Manage your cash flow

Proper management of your cash flow includes ensuring that you have adequate funds on hand to cover any unexpected expenses or delays, as well as managing your loan drawdowns to ensure the completion of each stage of the project.

How to Get a Construction Loan

There is plenty of advice available when undertaking any construction project and it is important to understand the finer details of the loan and timing of the project. Talk to one of our brokers to help set you on the right path.

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Work with SCF Solutions for your construction financing

Sunshine Coast Financial Solutions specialises in helping our clients obtain the financing they need to build or renovate your dream home or commercial property. With our industry expertise and personalised approach, we make the construction loan process simple and stress-free, so you can focus on your construction project.

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Get the right loan for your needs

We take the time to understand your unique circumstances and financial goals, so we can recommend loan products that suit your specific needs and preferences.

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Complete assistance with your loan application

Our decades of industry experience allows us to provide expert advice, guidance, and assistance with paperwork. This is how we take care of the details for you.

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Wide panel of lenders and great loan products

We give you access to a great range of loan products and competitive interest rates — whether you’re a first-time homebuyer, property investor, or business owner.

FAQs on Construction Loan

Yes, in fact, one of the common uses of construction loans is to fund major renovations, such as adding a new room, updating a kitchen or bathroom, or extending a home. Construction loans can also be used for more extensive renovations.

Note that construction loans are typically designed to cover the cost of construction only, not the purchase of the property or land. So if you’re renovating a property you already own, you’ll need to have equity in the property or be willing to use other assets as collateral to secure the constsruction loan. Construction loans for renovations are also subject to similar lending criteria as construction loans for new builds, which may include detailed building plans, council approval, and regular progress inspections by the lender.

This is generally not the case. With a construction loan, you typically only pay interest on the amount of money you have drawn down to date. This means that as you draw down more funds to pay for construction costs, your interest payments will increase.

Once your construction is complete and your home is ready to move in, your construction loan will typically convert to a regular home loan, and you’ll start making regular mortgage payments, which will include both principal and interest.

Typically, construction loans have a term of six to 12 months, although some lenders may offer terms of up to 24 months. Once construction is complete, the loan will usually convert to a regular home loan which can go up to 30 years.

Owner builder construction loans are designed for individuals who plan to build their own home without hiring a professional builder. These loans are typically structured in a way that is similar to traditional construction loans.

However, standard construction loans are typically offered to licensed builders. Owner builder construction loans on the other hand are designed for individuals who are building their own home and are responsible for the construction process themselves. This can include tasks such as obtaining permits, hiring subcontractors, and overseeing the construction process.

Owner builder construction loans may be more difficult to obtain than standard construction loans, as they may require additional documentation and approvals.

Yes, most construction loans require a down payment, which can range from 10% to 20% of the total loan amount.

You’ll generally need a credit score of at least 680 to qualify for a construction loan, although some lenders may require higher scores.You’ll need to show that you have a stable income and the ability to make payments on your loan. A deposit of 10% to 20% of the total loan amount will help you have less speedbumps in your application as well. To be approved, provide detailed plans and specifications for your construction project, including cost estimates and timelines. If you’re working with a builder, they’ll need to have a track record of completing similar projects successfully. Get an appraisal to determine the value of the property once construction is complete, as well as an insurance coverage to protect your property during construction and after completion.

Typically, the loan is disbursed in stages as the construction project progresses. The lender will inspect the work at each stage and release funds as each milestone is completed.

Some lenders may require you to use a contractor that is approved by the lender, while others may allow you to use your own contractor.

The approval process for a construction loan can vary and may take several weeks or longer.

What our Clients Say

My husband and I are very grateful and happy with the service we received from Chris and his team at SCF Solutions. Very professional and kept us up to date with everything. Would not hesitate to use them again or to recommend them to anyone wanting a broker.
Morgan Andrews (Morgo)Morgan Andrews (Morgo)
00:53 01 Apr 22
What an absolute campaign from Chris and Dan to get my loan through. They bent over backwards to get the result we wanted. No doubt best in the industry. Up front, honest and hard working. Would highly recommend the team at SCFS to anyone. Thanks for everything team.
Alexandria MontgomeryAlexandria Montgomery
04:44 27 Mar 22
Jo is absolutely incredible! This is the 2nd time my husband and I have gone through Jo for our home loan and I can't recommend her highly enough. We have had such an easy and positive experience that we now have friends, co-workers and other family that have also approached Jo and were also blown away with her service and how easy she made the whole process of applying for a home loan!All we can say is THANK YOU!
chloe leechloe lee
05:24 25 Mar 22
High recommend Joanne and her team; they have been a major support for us with getting our home loan. They communicated really well and are fast with their replies and know what they are doing. I don't know where we would be without them
Zelko KalicZelko Kalic
04:21 18 Mar 22
Just a massive to thank Chris, Daryl and the team for an absolutely professional, dedicated and efficient effort to secure my loan.They went over and beyond any other services I’ve experienced which has made my dream come true. Cannot recommend SCFC enough for their extraordinary efforts. Thank you 🙏
Joanne SansomJoanne Sansom
02:47 18 Mar 22
Can highly recommend Chris and his team at Sunshine Coast Financial Solutions. Chris always provides a prompt and professional service, nothing is ever too much trouble and always goes above and and beyond. Chris is extremely down to earth and explains things in simple terms. Thanks Chris for all your help you have provided and will most definitely continue to use you and recommend you.
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