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What's different about construction loans?

The Keystart team highlight three factors for you to consider when using your home loan as a construction loan to build a new home. Learn more.

Building your own home is an exciting but sometimes overwhelming process. With different key players involved, it’s essential to have a good understanding of what is involved at each stage, including your loan application process.

We've highlighted three factors to consider when looking at a Keystart construction loan, that is, a loan to build a new home. 

Construction loan deconstructed

If you decide to build a new home, your home loan will be a construction loan. With Keystart, there are three main factors you should be aware of.

1. While your home is being constructed, your repayment amounts will differ from your loan repayments after you move in. 

During your building process, we arrange for payments to be made for the purchase of the land and progress payments to your builder. After we have made a payment for the purchase of your land, we offer you the ability to make a low minimum monthly payments, rather than the full repayment amount. When your home is fully constructed, you will need to make the full monthly loan repayment.

Keystart recommends that customers pay more than the minimum monthly payment. There are advantages in paying more than this minimum amount.

More about extra payments during construction

When applying for a Keystart loan, we check every application carefully to ensure that our customers will be able to afford home loan repayments without getting into financial difficulty.

2. Keystart charges interest during construction. 

Interest is charged to your loan throughout the construction phase. You only need to make the minimum construction payment. However, for a Keystart construction loan, interest charges begin on the date we first fund any part of your loan and will increase in amount after each progress payment to your builder. The accrued interest will affect the amount of your monthly repayments when you begin making full repayments after construction is complete.

Keystart recommends that customers pay more than the minimum monthly payment.

More about managing interest charges during construction

3. Any changes or upgrades during pre-start with your builder must be approved by Keystart before being agreed with your builder. 

Building your own home is an exciting process. It may be tempting to change your mind on your house plans or materials. Any changes you make to the floor plan of your home or materials used can affect the overall cost of your build, sometimes significantly.

If you decide to get a Keystart loan, your construction loan amount is approved based on the original building contract you signed. Keystart must be contacted if you consider making any changes to your building contract. All changes and variations must be approved by Keystart before they can be agreed with your builder. We need to ensure the variations meet Keystart's minimum building requirements. We also need to check that there will be any impact on your progress payments.

Depending on the changes, you may need to fund these costs yourself immediately before any changes are can be made to the building plans.

Find out more

Our home loan specialists are able to provide assistance through the home loan application process, from start to finish. You can find if you may be eligible for a Keystart home loan and find out how much you may be eligible to borrow.

  • How much can I borrow?

    By giving us a few basic details, we can tell you how much you may be able to borrow.

    How much can I borrow?
  • Ready to apply or want pre-approval?

    You can start your application or just find out if you qualify. 

    Find out if you qualify
  • Compare our home loans

    Find out more about Keystart's home loans.

    Compare our loans