Construction Loans- What you should know about inspections and valuations

During construction, your lender will require an inspection and valuation of work completed.

This is for the lenders own internal purposes and helps them to confirm if further funds can be provided.


For registered builders:

• Prior to commencement of building, to estimate value of land and proposed improvements.

• When the first progress claim is requested.

• When the final progress claim is requested.


For owner builders:

• Prior to commencement of building, to estimate value of land and proposed improvements.

• When any progress claim is requested.

Valuations are either external or internal but lenders will let you know if they require access to the property and if they charge a fee for this.

For further information, please ask your home loan specialist


Cost overrun.

Payments can only be made up to the valuation amount for each stage of construction.

If the loan balance plus construction claim exceeds the funds approved, then this is considered a cost overrun.

You are responsible for paying any cost overruns associated with the construction from your own funds.

Progress payments may be stopped immediately until this cost overrun has been met.


Your contribution.

You are required to make some contribution from your own funds towards your construction loan

However, the amount that you need to contribute depends on a number of factors.

Please contact your home loan specialist for further information.


Final payment.

Before your final progressive payment can be made, after the building has been completed, you will need to provide your lender with the following documents:

• For new homes: a copy of the occupancy certificate or interim occupancy certificate where only external items such as driveway and landscaping (not included in construction valuation) are outstanding.

• For renovations and extensions: a copy of the final inspection certificate.

• A copy of the building insurance/fire policy may also be requested.

The certificates referred to may differ for each state or territory.

For further information about the documentation required in your state or territory, please speak to your home loan specialist.


Conversion to principal & interest.

When your interest only period finishes your loan will convert to principal & interest.

You will be advised in writing of what your new repayments will be If you finish building before the end of your interest only period, you can ask us to vary this contract to bring the interest only period to an end and start your principal and interest repayments.


Need a construction loan?

Contact us @ propertyloans@realrenta.com

Marlene Liontis
Friday, 15 March 2019

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