Construction & Development Loans
Helping you build your dream home. Pay construction costs in stages, reducing expenses as you build your house.
Construction and development loans are generally categorized into two types: those with existing land and those without. For clients who already have land, you will need to provide a construction cost budget and insurance documents, and we can help you apply for the necessary loans. These loans will be disbursed to you gradually as the project progresses until the house is completed.
For customers who do not yet own land, you can obtain a loan to cover the costs of purchasing land and subsequently building a house.
Construction loans vary in terms of loan-to-value ratios among different banks or financial companies. Banks typically lend up to 90% of the land and construction costs, while financial companies usually lend up to 65%.
Financial companies need to determine the loan ratio based on different projects, typically a loan ratio of 65%.
Advantages and operating methods
Advantages
1. The loan is disbursed in stages, with payments made in quarterly installments during the construction process. The interest you need to pay is based on the principal that has already been disbursed, and no interest is required on the portion that has not yet been disbursed.
2. Loans can be pre-approved for you based on your construction plans, ensuring you have sufficient time to plan and construct.
3. During construction, only interest needs to be paid, or no interest needs to be paid at all, reducing expenses.
4. If the house being built is for owner-occupancy, it will automatically become a mortgage upon completion, and repayments will begin as a regular mortgage. If the construction loan is obtained from a finance company, the term is typically one year, and the principal and interest must be repaid in full upon maturity. This type is more suitable for developing clients.
How it works
1. You can borrow up to 90% of the project cost from a bank, but there are strict income requirements. Financial companies typically offer 65%, but there are no mandatory income requirements.
2. Depending on the amount you are borrowing, you may need to provide an appraisal.
3. The loan is disbursed in installments as the builder issues invoices to you. The bank typically pays the builder or supplier directly, while the finance company pays you, and you then pay the builder yourself. You only need to pay interest on the amount disbursed.
4. During the project, you only need to pay interest on the withdrawn funds until the principal is repaid upon project completion.
How much money can I borrow?
If you need a loan to build a new house, the amount you can borrow depends on the value of your house, the type of building contract, and your ability to repay the money.
Depending on the amount you wish to borrow, you may need to have an estimate taken at different stages of the project.
Please note: Cost overruns are common during construction, so please track your budget as the project progresses. This allows you to make adjustments as needed to ensure you are able to complete the project.
How to apply
Call us to speak with one of our professional financial advisors.
Monday to Friday, 9:00 AM to 5:00 PM
Saturdays and Sundays, 10:00 AM to 4:00 PM
021 0699 878
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