In terms of homeownership, building a new home is as exciting as becoming a homeowner. If you agree to a small deposit construction loan, you must exercise caution. The construction process isn’t perfect. It involves several moving parts that no one person has control over.
Those interested in building a new home with a contractor must give the contractor a deposit, too. It’s important to procure financing before reaching an agreement with a contractor. If your financing falls through, your builder won’t return the deposit. Check the agreement and read through the deposit information carefully. There might be a non-refundable clause.
Construction loans with a small deposit may require a guarantor. With a guarantor and a small deposit, you might receive 100% of the project’s value. If the project falls through, the home loan lender might not return the application fee. Before signing contract documents, read the information carefully. Find out if the deposit is refundable in case the project isn’t realised.
If the financing goes through and the contractor is ready to go, the home loan provider pays the contractor directly. These disbursements are known as contractor drawdowns. The builder is asked to provide an invoice, and your job is to ensure that the home loan provider receives the paperwork.
Warning: If you buy land first and wish to commence construction at a later time you will most likely be taking an unnecessary & avoidable risk associate with a future lower land valuation, converting a fantastic & exciting experience into a nightmare & financial ruin. We strongly recommend that low deposit home loan applicants taking advantage of the first home owners grant (FHOG) deal with a reputable home building company and purchase a complete home & land package together.
Building a New Home Conclusion
For more information about building a new home with a small deposit, contact your trusted Mortgage House home loan expert. We’ll take a look at your goals and current financial circumstances. If you only have a small deposit available, we take a look at ways to maximise the financing and current home loan rates.
