A Construction Loan is required when sourcing finance to build a property. Whether it is on a block of land that you already own or part of a House & Land package. A Construction loan is generally drawn down in stages as the builder reaches the different milestones stipulated in the building contract. These are referred to as progress draws/payments.
These stages are generally:
• Base (i.e. when the concrete slab is laid)
• Frame (i.e. when the framework or walls are up)
• Lockup (i.e. when the roof, door and windows are in place)
• Fixing (i.e. when the house has been fitted out with appliances)
• Practical Completion (i.e. the house has been completed and is ready for occupation)
The lender uses an independent valuer to monitor the construction process. This is to ensure that before payment is released to the builder that the work has been carried out in accordance with the contract.