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Construction Loans

A flexible and convenient method of property development finance. Access money as you need it throughout the construction of your new home or investment property.

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Construction Loans

Your number one choice for construction loans in Newcastle

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What are the pros and cons of a construction loan?

Construction loans are one of the most flexible and convenient financing options for a new home build. There are a huge range of attractive benefits including:

  • You can draw money from the loan when you need to pay for construction costs (otherwise known as progress payments)
  • Because the money is progressively drawn, you will only pay interest on your loan – this gives you a lower monthly obligation and more time to save up.
  • You can make additional payments to your construction loan whenever you like. This allows you to reduce the balance of the loan and lower interest rates over time if and when you have the funds to do so. 

Of course, construction loans aren’t for everyone. There are some downsides you will need to consider like: 

  • Construction loans are only available for houses built and kept for personal investment or residential purposes, not for buildings you intend to immediately sell.
  • Due to the flexibility of this kind of loan, lenders tend to impose higher standards in terms of credit scores and down payments. Your lender will ask for a wide range of documents before they agree to lend you money.
  • Your loan term — no matter how long it is — will start from the moment you are given the loan. For the first few months or years, you will only pay interest on the loan, but when it’s time to start repaying the loan, the lender will include the months (or years) of interest-only payments into your monthly loan payment.
  • Construction loans interest rates can vary from regular mortgages as there is not an asset to secure against. 
  • You will need to pay back the entire balance at the end of the loan’s term which means you will need to be prepared and have the funds ready to go.

Our team of experienced mortgage brokers can help find the best possible deal for your renovation or new home build. 

We have an in-depth understanding of all 20 lenders’ requirements, interest rates and terms, so once we have a thorough understanding of your construction goals, we’ll match you with the perfect loan to meet your needs.

How does a construction loan work?

A construction loan allows for interest-only mortgage repayments for the land prior to construction and interest-only repayments during the construction process.

The funds will be paid directly to your builder in drawdowns after a portion of the work has been completed (like the slab has been laid). This ensures you will only pay interest on the portion of the loan you have drawn down, rather than the entire loan.

Once the build or renovation project has been completed, your construction loan will be converted into a standard variable home loan. Repayments will then be based on the principal and interest. 

The amount of time you have to complete construction or renovations varies from lender to lender. Some will provide 12 months for you to complete construction and drawn down on your loan while others offer 24 months.


We will provide more guidance around the construction window as we compare lenders on your behalf.

Construction Loans
Watson Mortgages
"Building our own home has been made easier by the help from Watson Mortgages.”

Contact Watson Mortgages for an obligation-free consultation

Why should I choose Watson Mortgages?

We’re experienced mortgage brokers for construction loans in Newcastle, Lake Macquarie, the Central Coast and the Hunter Valley. 

Why?

Because we’re passionate about finding the best deal for our clients and providing ongoing support, whether it’s for a current or future construction loan. 

Our goal is to reduce the stress of finding a loan and make the home building process simple, streamlined and best of all, exciting. Building a new home is one of the biggest milestones in life — and we’re here to help make it happen.

Construction Loans
"Watson Mortgages help take the "worry" out of buying our dream block.”

Here are just a few benefits of choosing Watson Mortgages for a construction loan in Newcastle:

 

  1. We have more than 20 lenders to choose from, meaning we’ll find a flexible construction loan to suit your needs.
  2. We’ll manage the whole process from start to finish. We’ll help find the right loan, communicate with lenders on your behalf, submit documents and secure a loan, then provide ongoing services and support to make the repayment process simple.
  3. Our services are complimentary and convenient. Our brokers can meet at your location, or we can have a more formal meeting in our office.
  4. We’ll find the lowest interest rate possible on your construction loan, so there will be less stress when it comes to your monthly interest payments.
  5. We have the experience and knowledge to provide mortgage and debt consolidation advice, so you will feel supported and on top of things from day one.

Contact the team from Watson Mortgages for an obligation-free consultation today. We’re committed to achieving your homeownership goals.

Frequently asked questions

Is a construction loan right for me?

If you are looking to build a new home but don’t want the burden of a lump sum sitting in the bank, a construction loan might be the best option for you. With a construction loan, you can access money to pay for construction-related costs when you need to, rather than being tempted to spend the loan on unnecessary purchases.

Plus, construction loans have the added benefit of being interest-only for the first few months (or even years) of the loan’s term, so you will have less to pay upfront and more freedom during the construction process.

To find out if a construction loan is the best option for your home building journey, contact the team from Watson Mortgages today.

How much can I borrow?

It depends on the lender and the size of the project. The first step is to book a consultation with the team from Watson Mortgages — we can flesh out the details and determine how much you need to borrow based on your construction plans, then we’ll find a construction loan to suit your needs.

What documents will I need to provide?

  • As you go through the building process, different documents will be required. When you apply for a construction loan in Newcastle, we will need the following documents:

    – Council-approved plans

    – Industry-standard fixed price building contract

– Copy of the builder’s licence

 

– Copy of the builder’s risk and indemnity insurance policy

 

– Copy of the home warranty insurance certificate.  


As each stage of the building process is completed, your builder will request payments, which means you will need to draw funds from your construction loan. To keep your lender in the know, you will then need to provide the following documents:

– A signed and completed ‘Progress payment request’ form from you

– The builder’s tax invoice for that particular stage on official letterhead with their ABN.


Finally, prior to the completed build, your lender may require:

– An inspection report from the bank’s valuer

– A building insurance policy with the lender, highlighting them as the financier.

Depending on which lender we recommend for you, we will provide more information about what documents are required for the construction loan to go ahead. 

What will the interest rate be?

Again, it depends on the lender you choose to go with. With Watson Mortgages, our brokers will find a deal to set you up for success. We will provide recommendations and advice, highlight the pros and cons of each loan, and guide you towards the suitable option for your circumstances.

Do I need to pay a deposit?

Generally speaking, a 20% deposit is required for any loan. If the deposit is less than 20%, the lender will require Lender’s Mortgage Insurance (LMI) which will add to the overall costs.

Lender’s Mortgage Insurance is important to instill confidence in the lender. It insures the lender in the event that the borrower cannot pay their mortgage.




What other services do you offer?

At Watson Mortgages, we have close contacts with local financial planners, banks, lawyers and many more essential services, meaning you can access holistic service and be set on the path for success. 

As well as Watson Mortgages, we also offer services via: 

No matter where you are in the home building journey, our group can help you achieve your goals in a cost-effective way.

Ready to start the home building or renovation process? Get in touch with our team of experienced brokers on (02) 4018 7505 to book a consultation today. We’ll find the right deal and most reliable lender for your building project.

"The whole process has been easy from beginning to end.”

Contact Watson Mortgages for an obligation-free consultation

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