Understanding Construction Loan Fees and Costs
When planning your new build, major home renovations, or buying off the plan in north east Melbourne, understanding Construction Loan fees is crucial for budgeting your project effectively. Construction Loans operate differently from standard home loans, with unique fee structures that reflect the progressive nature of building projects.
Progressive Drawing Fees
One of the most significant fees associated with Construction Loans is the Progressive Drawing Fee. This fee applies each time funds are released during various stages of the project. Lenders typically charge between $200 to $500 per drawdown, depending on the institution and loan amount.
Mach Mortgages can access Construction Loan options from banks and lenders across Australia, helping you find fee structures that align with your project timeline and budget requirements.
How Progressive Payments Work
Construction Loans use a progressive drawdown system where funds are released in instalments as your project reaches specific construction milestones. This approach means you only charge interest on the amount drawn down, rather than the full loan amount from day one.
The typical progressive payment schedule includes:
• Deposit and initial payments upon signing fixed price contracts
• Foundation and slab completion
• Frame and roof installation
• Lock-up stage completion
• Fixing and completion stages
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Interest Rates and Repayment Options
During the construction phase, most lenders offer interest-only repayment options, allowing you to manage cash flow while paying sub-contractors, plumbers, electricians, and your registered builder. The interest rate during construction may differ from the ongoing rate once building is complete.
Lenders base their 'as if complete' valuation on the finished property value, which influences the loan amount you can access. This valuation considers your ideal location, the price range of comparable properties, and whether you're planning to demolish existing property for a new build.
Additional Fees to Consider
Beyond Progressive Drawing Fees, several other costs apply to Construction Loans:
• Valuation fees for land and 'as if complete' assessments
• Legal fees for reviewing fixed price contracts and council plans
• Permit and development application costs
• Building inspection fees at each milestone
• Out of Contract Items not included in your building agreement
Application and Approval Process
Applying for a loan requires comprehensive documentation, including council plans, permits, and detailed costings from your registered builder. Most lenders require you to commence building within a set period from the Disclosure Date, typically 6 to 12 months.
The streamlined application process involves:
- Securing suitable land that meets council restrictions and regulations
- Obtaining development application approval
- Finalising building contracts and Progressive Payment Schedule
- Submitting loan application with required documentation
- Valuation and final approval
Making Your Construction Project Work
Whether you're considering house & land packages, major renovations, or a complete new build, it's essential to make a plan that accounts for all associated fees. Understanding council regulations, securing appropriate permits, and working with qualified professionals ensures your project progresses smoothly.
Mach Mortgages specialises in Construction Loans for clients throughout north east Melbourne, helping you understand fee structures and find suitable lending options. Our experienced team can guide you through the application process and explain how progressive payments work for your specific project.
As your renovation Mortgage Broker, we'll help you compare fee structures across multiple lenders, ensuring you understand the total cost of your Construction Loan. From initial planning to final completion, we're here to support your building journey.
Call one of our team or book an appointment at a time that works for you to discuss your Construction Loan requirements and fee structure options.
