Finding the Right Loan for Your Build
It’s the great Australian dream to own your own home. Maybe building your own new home is your dream. Not everyone has all of the money upfront to build a new home, so it’s important to find the right loan for your build.
Finding a home loan can be a pretty daunting prospect, once you consider the seemingly endless maze of paperwork, banks, lenders, negotiations and more. The main things to keep in mind are the features you’ll need from your loan and how much it will cost you in the long run.
Read through our easy guide to financing the construction of your home for some additional useful advice. Here are a few tips to finding the right loan for your build.
Compare Loans
Ask the different lenders for a key facts sheet so you can compare features and fees. Take note of the total amount that you’ll need to pay back, the repayment amounts, fees and other charges.
Principal and Interest Loans vs Interest-Only Loans
Learn about the two and decide which is right for you. Principal and interest home loans mean you make regular payments against the amount borrowed as well as paying interest. You would pay this loan in full over the life of the loan and over an agreed period of time.
Interest-only loans mean that your repayment amount will only cover the interest on the loan. This means that the principal amount that you borrowed doesn’t reduce, which may end up costing you longer in the long run.
Interest Rate Options
You can usually choose between variable, fixed and split rate home loans. Variable interest rates can go up or down, usually depending on the official cash rate. Fixed interest rates don’t change over a fixed period, after which they will revert to a variable interest rate. A split loan means it is a little bit of both.
Construction Loans
Building a new home might mean that you need a construction loan, which would allow you to withdraw money in stages as you get billed for work by tradespeople and suppliers. You only pay interest on money that you’ve used, and most lenders will offer this at a variable interest rate.
You would need plans, permits and a fixed-price building contract to be approved for a construction loan. You may also find that you need a land loan. If you are financing your land, ask your lender if you will also qualify for the money needed to construct your home.
Talk to Your Builder About Finance Options
You will often find that builders can offer very appealing and comprehensive finance options. If you choose McDonald Jones Homes as your builder, you can reap the benefits of their partnership with MyChoice Home Loans, an independent Australian mortgage broker that specialises in custom designing construction loans to suit your needs. Their team has the experience in the construction and home market to be able to assist you by taking care of all of the paperwork. MyChoice Home Loans can negotiate better outcomes for you and be your advisor throughout each step of the home’s construction.
For more information about our finance options or tips on how to choose the right loan for your build, please contact McDonald Jones Homes online or call us today on 1300 555 382.