Mortgage and finance

Some lenders offer arrangements that let you pause repayments for up to twelve months while your home is being built. During that period you are not making repayments on the construction loan, so you are only carrying your own rent or existing mortgage.

Interest continues to accrue during the pause and is added to your loan balance, which increases the total amount you repay over the life of the loan. Eligibility is assessed and determined by the lender. Availability, terms and maximum duration vary between lenders and can change.

No. A construction loan draws down in stages and you pay interest only on what has actually been drawn. Repayments therefore start small after the slab and climb with each stage. What catches people out is the final stages, where you are paying on close to the full balance while there is still no tenant.

Often, yes. Usable equity is generally what a lender will let you access against your existing property after allowing for their maximum loan to value ratio. Whether it works in your case depends on your valuation, your existing loan and your serviceability, which is what the capacity assessment is for.

No. Citadel Developments holds a real estate licence, not a credit licence. We do not provide credit assistance or recommend credit products. We introduce you to a licensed broker, and all credit advice and lending decisions sit with them and with the lender. You are free to use your own broker.

Most lenders look for between 5% and 20% of the total of the land and build, and the figure depends on the lender, your income and whether you are using cash or equity. Under 20% usually means lenders mortgage insurance. Equity in a property you already own can often do the same job as cash. The only number that matters is the one a broker confirms against your actual position.

A construction loan releases money in stages as the build progresses rather than in one lump sum at settlement. You are charged interest only on what has been drawn so far, so repayments start small and climb at each stage: land, slab, frame, lock up, fixing and completion. A normal home loan hands over the full amount on day one and charges interest on all of it from that day.

Usually yes, though lenders generally want two years of tax returns and financial statements before they will treat the income as reliable. Under two years narrows the field rather than closing it, and some lenders assess recent income differently. This is the single biggest reason to establish capacity before looking at property rather than after.

Fixed price build contracts normally specify a build period and what happens if it is exceeded, often including liquidated damages payable to you. Weather, trade availability and council approvals are the usual causes. The contract is where the answer lives, which is why it is worth having a conveyancer read it before you sign rather than after.

You need to know your borrowing capacity before you look, which is not the same thing as pre-approval. A capacity assessment is an indicative range from a broker and does not touch your credit file. Formal pre-approval is a lender decision, involves a credit enquiry, and generally has an expiry. Starting with the range avoids multiple enquiries while you are still deciding.

Generally yes if you are borrowing more than 80% of the value, though some professions and some lender policies change that. It is a one off cost that can usually be added to the loan rather than paid up front. Whether it is worth paying in order to buy sooner is a conversation for your broker, not a decision with one right answer.