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UNDERSTANDING CONSTRUCTION FINANCE

The Construction Loan Specialists


DID YOU KNOW? Construction loans are structured around the unique payments needed for a new home build or a major renovation. It allows progress payments to be made in installments as work is completed.


We know the world of finance can appear complicated and overwhelming. At Astute the world of construction finance is our world, we understand it inside out. We cut through the jargon and provide you with simple, straightforward financial solutions, tailor made for your individual circumstances. We’re experts in construction finance and can guide you through the process to secure funding that suits your needs.

WHAT WE DO

We’ve spent years understanding the specific client needs within the construction market to prevent you from being billed hidden charges and fees. Our trained professionals assist you and make sure that the whole process of finding a loan and buying a home is a seamless and enjoyable experience.

OUR PROMISE ƒ Provide a range of clear cut loans ƒ Remove the complexity from lending ƒ Custom-built loans tailored to your needs ƒ Broken down into straightforward terms and offers ƒ All the essentials without charging you for the extras you don’t need ƒ Highly competitive rates ƒ Lending options available able to finance up to the full purchase price of your property


WHY ASTUTE? WE WORK FOR YOU, NOT THE LENDER An Astute finance specialist can help you find and plan the most appropriate loan for your needs and circumstances.

WE OFFER ƒ Obligation free comparison rate check-up ƒ Access to 25+ lenders including the big banks ƒ Fast pre-qualifying process ƒ Your Astute lender works with you from start to finish

ƒ Convenient service, you pick the time and place

submission, to approval, to settlement and beyond.

ƒ NO fees

ƒ All brokers are members of the Mortgage Finance Association of Australia (MFAA)

ƒ Independent from the banks - We understand your portfolio to ensure funding suits you rather than the lender.

OUR TEAM OF EXPERTS Astute are specialists in construction loans and other complex lending scenarios. We are here to support you manage your purchase from

ƒ The Astute team has been operating since November 2001


TIPS TO MAKE THE FINANCE PROCESS EASIER ƒ Start your finance enquiries sooner rather than later to ensure there are no delays to your project. Too often projects are delayed due to finance approvals not coming through causing issues with delivery of progress payments ƒ Make sure you have included Provisional Allowances in your contracts. Provisional Allowances are a sum of money (nominated by you) which is set aside

in your building contract to allow you to do upgrades throughout the selection process. ƒ Send a copy of your Post Contract Variations to your lender to ensure that they have a complete list of the costs and inclusions of your new home when it comes time to do your property valuation.

ƒ It is never too late to contact our partner broker for obligation free advice or assistance in getting your application moving. ƒ Feel free to talk to your Pre-Construction Administrator at anytime if you are feeling overwhelmed or concerned about the finance requirements.

ƒ Sign loan documents with your broker or lender directly, don’t wait for them to arrive in the post to you.

DID YOU KNOW? • You can lend up to 97% of the property value, including land • Parents (or siblings) can offer their property as security to assist their ‘children’ purchase a property and avoid expensive Lenders Mortgage Insurance (LMI)

• You can lend up to 90% of the property value without LMI** • You can get a fixed rate construction loan • We can help you with your borrowing power so you can keep funds aside for progress payments during construction. **Lenders criteria applies


The scenarios below are designed to give you a quick snapshot when looking at purchasing a property and are a guide only. Interest rates may have changed.

FIRST HOME BUYERS

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INITIAL LAND PURCHASE Funds Table

CONSTRUCTION COSTS BUDGET Funds Table - 1

Purchase price of LAND first

$350,000

Proposed tender construction

$300,000

Land only (Grant at tender stage)

$0

Govt New Build First Home Grant

$15,000

Estimated deposit needed, savings

$24,000

Additional contribution

$10,000

ADD

ADD

Initial mortgage ins (capitalised)

$9,000

Additional mortgage ins (capped)

$15,000

Bank fees

$500

Bank fees

$0

Legal fees

$2,000

Legal fees

$0

Stamp Duty on land nil to $350K

$0

Stamp Duty on land nil to $350K

$0

Council & water rates

$500

Council & water rates

$0

Minimum amount required

$338,000

Minimum amount required

$290,000

Suggested loan amount*

$338,000

Suggested loan amount

$290,000

Scenario: Interest rate 3 yr fixed

5.39%

Scenario: Interest rate variable

5.69%

Mortgage length (years)

30

Mortgage length (years)

30

Principal & interest repayment

$1,896

Principal & interest repayment

$1,681

Interest only payment

$1,518

Interest only payment

$1,375

% of loan against property

96.57%

% of loan against property

96.67%

WITH EQUITY OR DEPOSIT INITIAL LAND PURCHASE Funds Table Purchase price of LAND first

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CONSTRUCTION COSTS BUDGET Funds Table - 1 Proposed tender construction

$350,000

based on 20% deposit or equity

$300,000

based on 20% deposit or equity

Estimated deposit needed, savings

Your tender contribution

$80,000

ADD

$60,000

ADD

Initial mortgage insurance (capitalised)

$0

Lenders mortgage insurance

$0

Bank fees

$500

Bank fees

$0

Legal fees

$2,200

Legal fees

$0

Stamp Duty (after $5K Govt discount)

$6,546

Stamp Duty

$0

Council & water rates

$500

Council & water rates

$0

Minimum amount required

$279,746

Minimum amount required

$240,000

Suggested loan amount*

$280,000

Suggested loan amount

$240,000

Scenario: Interest rate 3 yr fixed

5.19%

Scenario: Interest rate variable

5.69%

Mortgage length (years)

30

Mortgage length (years)

30

Principal & interest repayment

$1,536

Principal & interest repayment

$1,391

Interest only payment

$1,211

Interest only payment

$1,138

% of loan against property

80.00%

% of loan against property

80.00%

REPAYMENT GUIDE

POSSIBLE PAYMENTS OF LOAN FACILITY

LOAN AMOUNT

4.00%

5.00%

6.00%

LOAN

4.00%

5.00%

6.00%

$200,000

$955

$1,074

$1,199

$600,000

$2,864

$3,221

$3,597

$300,000

$1,432

$1,610

$1,799

$700,000

$3,342

$3,758

$4,197

$400,000

$1,910

$2,147

$2,398

$800,000

$3,819

$4,295

$4,796

$500,000

$2,387

$2,684

$2,998

$900,000

$4,297

$4,831

$5,396


WHAT YOU NEED WHEN WORKING WITH A BUILDER Entering into a building contract requires a substantial amount of money and as such it is important to ensure that your lender has sufficient funds in place to cover the cost of the contract. This contract is an important document to ensure the success of your project as the plans, designs and materials used during construction prevent any delays where possible. All parties need to work to a written roadmap with clear guidelines and rules on issues such as: ƒ Timelines with key milestones and when the work is to be completed

ƒ How and when payments are made

ƒ The scope of works

ƒ Scenario plan if there are delays

ƒ The contract price

ƒ How to manage variations

ƒ Any other matters that could lead to misunderstandings and disputes

LOAN APPROVAL PROCESS OVERVIEW THIS MUST BE SENT TO YOUR BUILDER TO COMMIT TO THE HIA BUILDER CONTRACT ƒ Preliminary or Conditional Loan Approval

THIS MUST BE SENT TO YOUR BUILDER ƒ HIA Building Contract ƒ Unconditional Loan approval

ƒ Authority to Commence Construction (ACC) Letter


An Astute finance specialist can help you find and plan the most appropriate loan for your needs and circumstances. Contact our expert team today for your obligation free comparison rate check-up. Visit astutefinancial.com.au/deewhy or call us 02 9984 1911

The Construction Loan Specialists

Understanding Construction Finance  

We know the world of finance can appear complicated and overwhelming. At Astute the world of construction finance is our world, we understan...