When it comes to a home loan tailored for construction, there are three key differences from a standard home loan in terms of the way your repayments work. Read on to learn more about what they are.
You only pay interest on the amount you have drawn down
While construction is underway, you only pay interest on the amount of the loan you’ve drawn down as your build progresses. So your repayments start small and you’re not paying for things you haven’t actually done. You’ll need to make this interest payment on the first of every month.
As your build progresses, and you make Progress Payments to your builder, the amount used (from your total amount borrowed) increases incrementally, and therefore, so will your repayments. This will occur at every stage of the build. A $50 Progress Payment Fee will also apply to each stage.
Once your build is complete your loan will convert to Principal and Interest repayments, meaning you start paying off the full amount borrowed, instead of just the interest. This means your repayments will increase accordingly.
For full details, be sure to check out your Loan Product Terms and Conditions.