What to know about financing a new build

Housing supply is in hot demand – but there are still ways to get into your new home.

By opting to build, you can bypass the overcrowded auctions and create a home that ticks all your boxes.

Whether you already have a section that you’re planning to build on or you’re looking at a house and land package, there are different types of loans that can help finance the build.

Here’s what you need to know.

Construction loans

A construction loan works differently from a standard mortgage for a pre-existing home. In most cases, the loan is drawn down in stages as you pay for the progress of your new build.

As each stage is completed, you will receive an invoice from your builder that you must submit to your lender for payment.

Standard mortgages

If you have enough equity in the land or other assets, you may be able to finance your new build with a standard mortgage.

For some, this may be an advantage, because it frees up cash to cover smaller costs along the way.

Unlike construction loans where interest is calculated on the funds used, you will be charged interest on the full amount of a standard mortgage from day one.

Owner-builder mortgages

Owner-builder mortgages are construction loans designed for people planning to build the house themselves, without the support of a professional third party.

These types of loans come with greater perceived risks, and some lenders may require a larger deposit as security.

A Mike Pero Mortgage Adviser can help you explore your options and find the home loan that’s right for your build. To learn more, contact your local Mike Pero Mortgage Adviser today.