What do you need to apply for a construction loan?
Typically, lenders will require to see fixed-price building contract and council approved plans. The value on which lenders will estimate the whole package will be the land’s value plus the cost of the building. In case you will need more money for furnishing and landscaping, you can ask your lender to revalue the property once the construction is complete.
The progression on which you will get the money for construction will be based on how fast you complete each phase. As soon as you finish one phase of construction, you will be able to go to the next and draw money. A valuer usually does the job of checking whether the phase is complete based on the parameters set by the fixed price building contract.
A construction loan is a convenient and safe way to fund the building of your new home. Aside from saving interest, it allows you to borrow money against the value of the completed property and not just the current value. The fact that the bank controls the flow of funds also protects you from cost over-runs and minimises the chance that you will run out of money before your construction is finished.