Building your dream home can be an exciting and proud achievement. There is however a serious side to the finance and builders contract you will be required to sign.

It is important to first get unconditional finance from a lender before entering into a contract with a builder.The summary below is a guide to general policies and what you will need to do before you can get the full approval from the lender.

Construction loans - how they work
When you take out a construction loan, the funds are not advanced upon settlement as they would with a purchase. Funds are released and paid to your contracted builder as “progress payments” on the completion of each defined stage of the Building Contract, e.g. completion of slab, framework, and so forth. Both the existing value and an “on-completion value” is used in calculating how much the lender is prepared to advance.
Why do lenders require a fixed price contract?
How is interest calculated during the construction phase?
How do progress payments work?
What documentation will I require?