Construction loan

Search for construction loans at RateCity.com.au

The idea of building or renovating a home to suit your needs can be very appealing. The monetary requirements of a major renovation or constructing a new home can be quite different from purchasing property. To meed the needs of this area of the mortgage market many lenders have introduced what is known as a construction loan.

Construction loans are designed so that you are only required to pay a set minimum amount when each stage of building or renovation is completed. In many circumstances a construction loan will assist you to buy land, build a residential dwelling on purchased land or finalise purchasing the land and conduct any construction or renovation work necessary.

These loans are only temporary and work when a variable loan is drawn down to pay the builder in stages. Example:

• Slab down
• Frame up
• External brick work completed
• Lock up stage
• Practical competition

By allocating small amounts of money over the construction period to the contractor this ensures the builder isn't being paid for work that has not yet been finished. These measures are designed to protect the borrower from any financial loss during the construction period. Loan repayments for a construction loan are interest only payable on the amount of the loan drawn down. Once the construction is complete the loan will revert to a permanent mortgage (principal and interest).

More info on popular variable rate home loans.

The table below displays construction loans less than 8.4%, sorted by best the best variable rate.