If your customer is seeking funds to purchase or refinance a block of vacant land (or property) along with funds to cover the costs of construction, they can complete this under one home loan facility.
For a construction loan, there are key data inputs required in ApplyOnline in the:
In the Loans tab, you’ll need to create a construction loan account and add any additional home loan account your customer wishes to have within their home loan facility.
To create a construction loan account:
Additional home loan accounts can be created within the home loan facility, but can’t be for construction purposes. These loan accounts can have different purposes, repayment and interest rate types. Simply:
A home loan facility can have more than one security property. These can be entered into the Security tab. For a construction loan, at least one security property must have the status, ‘To Be Built’. Simply:
A construction loan feature includes an interest-only repayment period of two years. The interest rate during this interest-only period will be the advertised variable interest only rate of the relevant loan purpose, at time of formal approval.
For example, if the advertised interest rate at formal approval for owner occupied was 5.8% p.a, and the construction loan account is also for owner occupied purposes, the construction loan account’s interest rate would be 5.8% p.a.
View our variable interest rates on our website.
We’ll lend up to a loan to value ratio (LVR) of 80%, based on the lower of the ‘as if completed’ valuation or cost to complete (e.g. the contracted construction price plus land value).
The minimum application amount is $150,000. The maximum construction application amount is $2,000,000 at 80% LVR. However, the construction home loan account limit for applications more than $1,500,000 can’t exceed 50% of the total lending being requested.
For example, if a home loan application is submitted for $2,000,000, the construction loan account or split can be up to $1,000,000 and the other funds can be split across one or more home loan accounts.
Also note, maximum loan amounts are subject to other maximum LVR parameters/limits, which may limit the maximum LVR e.g. the location of the property.
To find out more, see Understanding acceptable securities and maximum LVR limits.
To submit a construction loan, your customer will need to have:
The Building Contract must be entered into prior to formal approval or at the latest, the settlement of the land (where the land isn’t already owned by the applicant). It should also:
Prior to the first progress payment, copies of the builder’s indemnity/warranty (e.g. Insurance Under the Home Building Compensation Fund (IUHBCF)) and construction insurance are required.
Prior to the final progress payment, a copy of the general home insurance certificate also needs to be provided.
See Submitting progress payments for construction loans for more information.
If approved plans aren’t available, a copy of the plans which have been or are to be submitted to the council must be provided instead. Council-approved plans must be provided prior to the first draw down or progress payment.
The construction must be completed by a fully licensed builder and they must be ready to proceed within three months from loan settlement.
Owner-builders are not accepted for construction loans.
Methods for editing a construction home loan application will depend on whether our team have formally approved the application.
For other changes such as changing the builder or council approved plan, see Changing building contracts or plans on a construction loan.
A one-off construction administration fee of $1,500 is charged at settlement and covers administrative costs during the construction period such as arranging valuation inspections and progress payments.
Also view Understanding our home loan fees which outlines other fees that may be associated with settling the home loan (e.g. Documentation Fee), or any annual fees (e.g. Offset Home Loan Facility fee).
The construction phase must commence within three months of settlement and construction should be completed within 24 months of the settlement date.
During this time, repayments will remain as interest-only.
Once the construction phase has reached 2 years, we’ll send a letter to your customer notifying that their construction loan is reaching the expected timeframe. At this point, we may extend the timeframe for an additional 12 months.
If the construction phase hasn’t been finalised within 30 months post-settlement, we’ll notify your customer that their construction period will be ending soon (36 months post-settlement).
Where your customer can’t complete the construction with 36 months post-settlement, there may be implications to further funding or their limit may be reduced.
If the construction phase exceeds 24 months post-settlement, your customer will move to principal and interest repayments if an additional interest-only period hasn’t already been approved.
To request an extension of the interest only period, you’ll need to submit a variation application, which is subject to credit approval. To ensure your customer’s interest only period can be continuous, you’ll need to submit the extension application at least 30 days prior to the construction phase ending.
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