Q: Can I borrow money to build my own home?
A: Yes! There are lots of lenders in the market who will lend self-build loans.
Key things to note:
- Loan to value ratio: The amount you can borrow will depend on the value of the property you are building. The loan to value ratio (LVR) is the amount of money you can borrow compared to the projected value of the property. Lenders usually offer a maximum LVR of 75% for owner-occupied construction loans, but this depends on your individual circumstances.
- Construction costs: The amount you can borrow will also depend on the estimated cost of the construction project. The lender will need to see a detailed breakdown of the costs involved in the project, including building materials, labour costs, and any associated fees.
- Income and expenses: The lender will also consider your income and expenses when determining how much they can borrow. They will assess your ability to service the loan and may require evidence of your income and expenses.
- Deposit: Depending on the lender, you may be required to make a deposit towards the construction project. This will be in addition to any upfront costs such as land purchase or architect fees.
- Loan term: The loan term for a construction loan is typically shorter than a standard home loan. This is because the lender will likely release funds in stages as the construction progresses. The loan term will depend on the expected time frame for completion of the project.
- Interest rates: Interest rates for construction loans are generally higher than for standard home loans. This is because there is more risk involved in lending for a construction project. The interest rate may be fixed or variable, depending on the lender’s policies.
- Approval process: The approval process for a construction loan is more complex than for a standard home loan. The lender will need to review detailed plans and specifications for the project and may require regular progress reports.
- Building Code Compliance: You will also need to ensure that the construction project complies with all relevant building codes and regulations. The lender may require evidence of compliance before releasing funds.
At largemortgageloans.com, we are experts at securing self-build loans so give us a call or drop us a message to see how we can help get your building project off the ground. You’ll be king or queen of your very own castle in no time.
