If you require finance to build your new small home, Smart Footprint Homes has a network of brokers and finance professionals that can assist you and recommend the best way forward for your small home. Give us a call today and we will put you in contact with the broker that best suits your property goals and unique circumstances. 

For many who haven’t dealt with arranging finance for a new home before, it can be a bit of a daunting experience. Knowing where to start and which loan type you need can be confusing, but that’s where we come in. We believe building your own home should be and can be an exciting and enjoyable journey.

So here’s some valuable information around which type of loan you need to build your own home and how to get started.

What is a construction loan?

A construction loan is the type of loan required when you are either building your own home or undergoing extensive renovations which include structural changes to the home.

How does a construction loan work?

Construction loans are quite different to purchasing loans where you typically receive a lump sum of the loan amount at settlement, construction loans are paid out in periodic progress payments from the lender at different stages of construction such as deposit, slabs poured, frame up, brickwork, lock up and practical completion.

Loan repayments are interest only during the construction period, providing comfort and security to renovators and home builders by minimising their repayments during an expensive, and potentially stressful, time. Having an experienced builder who understands the process and details of a construction loan is a huge advantage to any individual embarking on their own home build project.

What are the benefits of using a construction loan?

1. Construction loans provide added security to the borrower. The use of progress payments through out the build, as opposed to paying a lump sum, means that the home owner and lenders are able to monitor the progress of the builder and ensure they aren't paying for anything that hasn't been completed or done properly.
2. The way in which the loan is structured means less interest is paid. The owner is only charged interest for the amount that has been drawn down instead of the amount of the full loan, saving money during the construction process.
3. Improved cash flow for the build. As the loan is interest only during the construction period, the repayments are lower which allows for more freedom during the build process with greater cash flow.

We hope this was helpful! If you have further questions, please get in contact with one of our friendly sales staff. With a wealth of local knowledge and experience they will help find the finance arrangement to best suit your needs and situation.