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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.

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. Keystart charges interest during construction. 

During your building process, we arrange for payments to be made for the purchase of the land and progress payments to your builder. Interest accrues on your loan as soon as we start to draw down these funds, or if we advance the First Home Owners Grant for the purchase of your land or as a payment to your builder. You can see the interest charges on your account in our Client Portal.

The accrued interest will affect the loan amount and impact on the amount of your monthly repayments when you begin making full repayments after construction is complete.

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

While your home is being built, you'll need to pay a minimum monthly construction period payment of at least $200 or more. 

Keystart’s construction period payment amount is based on your minimum monthly principal and interest repayment for your approved home loan and takes into consideration the rent or board you pay while you build your home. This payment aims to reduce the amount of interest added to your loan during your construction period while still being affordable for you. 

Depending on the amount of your payment, the minimum monthly construction period payment may reduce the interest added onto your loan during the build of your home. You're encouraged to pay more than this minimum payment if you can afford to do so. By making additional payments during the construction of your home, you'll be further reducing the interest accruing. You can choose to increase your repayments at any point during the construction period.

With the payment of the minimum monthly construction period payment, the amount of your home loan repayments will differ from the amount noted in your loan documentation. You'll be advised of your updated minimum monthly loan repayment amount as soon as your loan is fully funded. 

Your broker or home loan specialist will be able to calculate your minimum monthly construction period payment as you complete an application.

More about construction payments

This approach to minimum monthly construction period payments reflects Keystart's continuous review of our responsible lending obligations. 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.

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 the variations don't increase your expenses or debts and that you have the financial capacity to manage your home loan repayments once they come into place.

Depending on the changes, you may need to fund these costs yourself immediately before any changes are made to the building plans, so save yourself some stress and check with us first!

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.

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  • Ready to apply or want pre-approval?

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

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