Building your dream home as a nurse requires careful financial planning and the right construction loan features. As a Finance & Mortgage Broker, Nurse Loans can access Construction Loan options from banks and lenders across Australia, helping you understand the unique features that make construction financing different from standard home loans.
Progressive Drawdown System
Unlike traditional home loans where you receive the full loan amount upfront, construction loans operate on a progressive drawdown basis. This means funds are released in instalments as your build progresses through various stages of the project. The key advantages include:
• Only charge interest on the amount drawn down, not the full loan amount
• Reduced interest costs during the construction phase
• Payments align with construction milestones
• Funds are released directly to your registered builder
Your lender will typically require a Progressive Payment Schedule outlining when payments will be made to pay sub-contractors, plumbers, electricians, and other trades involved in your build.
Interest-Only Repayment Options
During construction, most lenders offer interest-only repayment options, allowing you to:
• Manage cash flow whilst paying rent or existing mortgage payments
• Reduce monthly financial commitments during the build phase
• Transition to principal and interest repayments once construction completes
• Plan your budget around a lower payment structure initially
This feature proves particularly valuable for nurses managing shift work income patterns and existing accommodation costs.
Valuation Process
Construction loans use an 'as if complete' valuation method. This means the valuer assesses your property's value as if construction were already finished, based on:
• Council plans and permits
• Architectural drawings and specifications
• Comparable sales in your ideal location
• Quality of finishes and materials specified
This valuation method helps determine your maximum loan amount and ensures the project remains financially viable.
Application Requirements
When applying for a loan, you'll need to provide:
- Fixed price contracts with your registered builder
- Council approvals and development application documentation
- Detailed construction plans and specifications
- Progressive Payment Schedule
- Evidence of suitable land ownership or purchase contract
- Financial documentation including income verification
The streamlined application process through experienced brokers helps ensure all documentation meets lender requirements from the outset.
Construction Timeline Requirements
Most lenders require you to commence building within a set period from the Disclosure Date, typically:
• 6-12 months for new build projects
• Shorter timeframes for major home renovations
• Extended periods for complex builds requiring additional council approvals
It's essential to make a plan with realistic timeframes, considering council restrictions, council regulations, and seasonal building constraints.
Fees and Additional Costs
Construction loans include specific fees such as:
• Progressive Drawing Fee for each payment release
• Additional valuation costs during construction
• Potential additional payments for variations or Out of Contract Items not included
• Higher interest rate compared to standard home loans during construction
Understanding these costs upfront helps you budget appropriately and avoid unexpected expenses.
Suitable Projects
Construction loans cater to various building scenarios:
• House & land packages
• Buying off the plan developments
• Custom builds on owned land
• Projects requiring demolish existing property and rebuild
• Major home renovations exceeding certain value thresholds
Some projects may qualify for home improvement loan products rather than full construction financing, depending on scope and value.
Planning Your Build
Successful construction financing requires careful consideration of:
• Realistic price range based on your borrowing capacity
• Location factors affecting building costs and timelines
• Builder selection and contract negotiation
• Contingency planning for potential variations or delays
• Transition planning from construction to permanent financing
Working with experienced mortgage brokers ensures you understand all aspects of construction loan features and can make informed decisions throughout the building process.
Construction loans offer unique features designed to support your building journey whilst managing interest costs and cash flow effectively. Understanding progressive drawdowns, interest-only options, and application requirements helps you prepare for a successful build experience.
Call one of our team or book an appointment at a time that works for you to discuss how construction loan features can support your home building goals.
