Securing financing for a renovation or build project can be a complex process, but with the right knowledge and resources, you can navigate it successfully!
Finding the right lending solution
If you’re considering a construction loan, it’s crucial to understand the various lending solutions available and what might best suit your needs.
There is a myriad of products and solutions available, but not all will align with your specific goals and financial circumstances.
A great resource is Episode 230 of the Property Trio podcast “Equity Unleashed: Property Planning & Borrowing for Renovations & Wealth Creation,” where we thoroughly dive into the pros, cons, and eligibility requirements of various lending solutions in detail.
Consulting with a Strategic Mortgage Broker is also advisable to explore whether you can draw from your equity to fund the construction or if you need a valuation based on the completed project and a fixed price build contract.
Tips from the Property Planning Australia Team
Tip #1: Recently, we’ve observed that builders have become choosier, often requiring evidence of pre-approval before progressing to the contract stage.
To navigate this, it’s wise to request a draft contract and secure the required ‘as if complete’ valuation beforehand to ensure the figures align and you can borrow the necessary funds.
Tip #2: Opting for a fixed price build contract can safeguard you against rising costs in materials and labour.
However, be vigilant as builders might include clauses that allow for these increases, so reviewing the contract thoroughly is essential.
Tip #3: Once you’ve chosen a lender, make sure to understand their specific requirements, especially if opting for a progressive drawdown loan.
Lenders often have stipulations about how the payment schedule should be structured, typically mandating that each stage of construction corresponds to a certain percentage of the total build cost.
Also, be aware that some builders may attempt to front-load contracts, charging more in the initial stages to cover increased costs, a practice that might not align with your lender’s guidelines and could potentially lead to funding issues.
Listen to the Property Trio podcast
For more in-depth insights on financing your construction project and developing an effective mortgage strategy, tune into the Property Trio Podcast, where numerous episodes are dedicated to these essential topics.
- Episode 9 – Why your mortgage strategy is more important than your interest rate?
- Episode 11 – Small time development – How it can work for you, but is it a risk worth taking?
- Episode 24 – How mortgage strategy shapes your ability to hold property and how it can pay off for decades to come
- Episode 31 – Get rich quick schemes – #1 of the top 7 Critical Mistakes
- Episode 67 – Subdividing – fundamentals for success
- Episode 68 – Renovations – top tips and mistakes to avoid
- Episode 191 – Risk management and the things that can go wrong when mortgage strategy is ineffective
- Episode 211 – The Post-Development Predicament, How Many Properties Do You Really Need? Do I Buy 2 Cheaper Properties or 1 Higher Value & Retirement Planning
- Episode 230 – Equity Unleashed: Property Planning & Borrowing for Renovations & Wealth Creation
- Episode 250 – Investment Borrowing Masterclass – Maximise Tax Deductions and Advanced Mortgage Strategies for Long-Term Wealth Creation
- Ep 257 – The Comprehensive Guide to Townhouses – Performance, Selection, Property Planning and Development Projects
- Ep 259 – Home Building & Development Project Perils: Tackling Escalating Expenses, Development Finance, Project Overruns & Their Cascading Impacts
Reach out to us
For expert guidance on construction financing and lending solutions, reach out to us and let our team help you navigate your next project with confidence.
