Australian's built 1.02 million homes between the 2016 and 2021 financial years. This was a big increase on the long-term average, which has typically involved about 750,000 dwelling completions during each five-year period prior to 2016.
In the past 12 months alone, 231,816 residential building approvals have been issued, suggesting lots of new homes are in the pipeline. That said, not everyone who gets an approval ultimately goes ahead with the project.
Why the current boom?
· Low interest rates: Australia has experienced a record low on interest rates in the past 12months or so, and this has seen borrowers flock into the market. New building and renovating loans have been a big part of that also, due to government incentives around construction.
· Government incentives: There have been many government grants around building and construction for the owner occupier as well as the building industry, driving borrowers to seek construction loans and build their own homes.
What is a construction loan?
A construction loan is similar to a regular home loan in some ways – interest rates are comparable, and you can choose between variable and fixed. However, where they differ is in how the lender delivers the money to the borrower.
How is a construction loan delivered?
With construction loans, the lender provides your loan in stages or 'drawdowns', as the different stages of your building contract are completed. The lender charges you interest only on the funds it has provided, not the full amount: so, if your total loan is for $500,000 but you've received only $100,000 of drawdowns, you'll only be charged interest on the $100,000 not the full $500,000.
Still thinking about building?
Applications for the Victorian Home Builder Grant closed on 14 April 2021, but we, as mortgage brokers, are here to help you find the best solutions and opportunities for your borrowing journey.
If you’re still thinking of building your dream home, or perhaps a home improvement of your current abode is on the cards, get in touch and we may be able to steer you in the right direction to secure the finance you need
