Home loan drawdown meaning1/26/2024 Funding your home build this way can help reduce the risk of financial loss by only borrowing small amounts at a time as opposed to the entire lump-sum.So essentially, funds from your approved loan amount are only charged interest as they are paid to the builder (drawn down). If you then draw down an extra $100,000 to pay the builder for the next stage (the frame), your repayments will now be based on the interest costs of $200,000. If one of these stages (such as the base) costs $100,000, then for the duration of that stage you’ll only be charged interest on that $100,000. This is a rough example and should be taken as such. Plaster, kitchen cupboards, appliances, bathroom, toilet, laundry fittings/tiling etc.įencing, site clean-up, final payment to builder Windows/doors, roofing, brickwork, insulation How does progressive drawdown work?Ī loan drawdown process typically consists of five or six stages: A standard home loan charges you interest on the full loan amount, but a home construction loan divides your loan into stages based on what part of the building process is occuring, a method known as progressive drawdown or progress payments. This is to keep your repayments to a minimum during construction, before reverting to a principal and interest loan at the end, known as the ‘end loan’.Īn even bigger difference between construction loans and home loans is how your repayments are calculated. They typically charge interest-only repayments for the duration of the build, which is usually set at 12 months. How does a construction loan work?Ĭonstruction loans function very differently to a standard home loan. Additionally, they tend to have higher valuation fees, as the lender has to do a valuation at each stage of the construction process. Getting a loan for a home that doesn’t exist yet can be a bit trickier, so a construction loan works in conjunction with the building process and helps you pay for it.Ĭonstruction loan interest rates are typically higher than standard home loans, as it's harder for a lender to value a home that doesn't exist yet, raising the level of risk. That's where construction loans come in.Ĭonstruction loans differ greatly to a normal home loan thanks to something called progressive drawdown.Ĭheck out our guide on how construction loans work: What is a construction loan?Ī construction loan is a specific type of home loan designed to assist the funding of a new home’s construction. This is the case even though your statement may show these amounts as advance repayments.If you’re thinking of building a home, you might need a loan to do so. Amounts prepaid in excess of the prepayment threshold are not permitted to be redrawn. Any amounts paid prior to the loan being fixed cannot be redrawn. Amounts which you have prepaid under your agreement since your most recent monthly repayment date cannot be redrawn until after your next scheduled repayment date has passed. However, you may not redraw an amount if it would result in the balance owing on your loan account exceeding the amount which would be owing if you had paid all scheduled repayments on time.įor fixed rate loans, redraw is only available for excess funds paid into the loan during the current fixed rate period up to the value of the prepayment threshold. Otherwise, you can complete the Home Loan Redraw Form (PDF 1007KB) and drop it into any BankSA branch, or emailed back to us at Rate Loansįor variable rate loans, amounts which you have prepaid under your agreement since your most recent repayment date cannot be redrawn until after your next scheduled repayment date has passed. If you haven’t registered for redraw, simply login to online banking to activate the redraw facility and you’ll be ready to redraw on your home loan when you need to without the need to complete any paper forms. If you’ve already registered for redraw via Internet or Phone Banking, it’s as easy as transferring your available funds into your preferred account via Internet or Phone Banking
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