Monday, February 25, 2008

How do I fund building a home?

If you're building a new home or planning major renovations to your existing home, a construction loan is generally the most appropriate funding option.

If your thinking of buying a block of land to build a home, then you would firstly need to find a block of land to suit the home you are thinking to build. Once you have decided on a block, you will require a tender of cost to construct the proposed home.

Inturn Starfund can arrange funding of the land settlement and a limit of funds to build. Construction must commence within 12 months of the land loan settlement.

Before construction can comence, you will need to prepare the following documentation:

* Development Application Approval (DA)
* Council Approved and stamped plans
* Fixed price building contract by a licenced and experienced builder
* Builders CV
* Builders home warranty insurance

The difference between a construction loan and a standard home loan is that instead of a lump sum payment at settlement, the loan is usually drawn down in stages, these are called "Progress Payments" which are paid to the builder.

As work progresses you will need to make progress payments to the builder.

So there are two stages when it comes to building a home, whether it's for owner occupation or investment purposes.

Stage 1: Purchase of the land

Stage 2: Construction drawdown commences and progress payments are paid to the builder in portions until the home is completed and occupancy certificates can be issued.