Most construction loans have a variable interest rate, this is to allow for the loan to be progressively drawn as the construction or renovation of your home occurs.

During the building or construction period, you only pay interest on the part of the home loan that has been drawn down, or paid out to the builder. You will not have to make a full loan repayment until your home is completed.

In addition to the normal verification documents required, the lender will also require the following documents when seeking a loan for construction purposes:

• All Risk Insurance, Public Liability and Workers Compensation insurance for your builder
• Home Warranty Insurance provided by your State Building Service Authority
• Council approved building plans
• Signed construction contract and specifications

Once your new home is completed the lender will require the following documents before the final payment can be made to your builder:

• Final inspection certificates from your building surveyor or local government inspector
• Certificate of building insurance

Approval for a land and construction loan is a little different to approval for an established home. Often the land and building purchase will need to settle separately. To accommodate this, your initial loan will be run as two separate, but simultaneous applications; one for the land purchase and the second one for the total construction cost.

At the completion of each stage, the builder or service provider will present you with an invoice. In order to make the stage specific payment to the builder you will forward this invoice together with your lenders authority to make the payment to the lender and MCA can help guide you through this process.

Your lender may also require an inspection and valuation of work completed so far. A fee may be charged by your lender at payment of each stage.