Construction Loan Success: How We Helped the Jenkins Build Their Dream Home

For many homeowners, building a custom home is a lifelong dream. This was the case for the Jenkins, a family of four who had outgrown their current residence and were eager to build a home tailored to their needs.

Here’s how we guided them through obtaining a construction loan and turning their vision into reality.

The Challenge

The Jenkins had saved diligently and were ready to embark on their construction project, but they faced several challenges:

• Limited understanding of the construction loan process and its differences from a traditional mortgage
• Difficulty in selecting the right lender and loan product for their needs
• Concerns about managing the construction timeline and budget
• Uncertainty about how to ensure the loan covered both land acquisition and construction costs
• Confusion about the drawdown process and progress payments
• Worries about potential cost overruns during construction

With a clear vision for their dream home and a budget in mind, the Jenkins approached us for assistance in navigating the complex construction loan landscape.

Our Approach

After an in-depth consultation with the Jenkins, we developed a tailored strategy to address their unique situation:

1. Financial Assessment: We conducted a thorough review of the Jenkins’ finances, including their income, expenses, and existing assets. This involved analysing their current mortgage, savings, and investment accounts to determine their borrowing capacity and equity position.
2. Loan Options: We explored various construction loan products, explaining the features and benefits of each.
3. Documentation Preparation: We assisted the Jenkins in gathering all necessary documents for the loan application and approval process, including council-approved plans, builder’s insurance certificates, and a detailed fixed-price building contract.

The Process

Loan Application and Approval

We helped the Jenkins prepare a strong loan application, highlighting their stable employment and excellent credit history. We then assisted them in applying for a construction loan with a lender offering competitive rates and flexible terms.

The application process involved several steps:

1. Pre-approval to establish borrowing capacity
2. Submission of detailed plans and scope of work
3. Arrangement of a ‘Tentative on Completion’ valuation by the lender
4. Review of the fixed-price building contract
5. Final approval and issuance of a formal Letter of Offer

Pre-Construction Documentation

We guided the Jenkins through obtaining and submitting the required pre-construction documents, including:

• Council-approved plans and specifications
• Signed and dated fixed-price building contract
• Builder’s insurance certificates

Loan Approval and Commencement

Once the loan was approved, we ensured the Jenkins understood the approval conditions and the construction commencement timeline. We coordinated with the lender to issue the commencement letter, allowing construction to begin. We explained that they had 24 months from the first progress drawdown to complete their build, as per typical lender requirements.

Progress Payments and Inspections

We educated the Jenkins on the stages of construction and the progress payment system. This included explaining:

• The typical five stages of construction: slab, frame, lock-up, fixing, and completion
• How funds are released to the builder as each stage is completed
• The lender’s inspection and valuation process at each stage
• The importance of monitoring the builder’s progress and ensuring each stage is properly completed before requesting a progress payment

We also clarified that they would only pay interest on the amount drawn down during construction, not the full loan amount.

The Outcome

Thanks to our comprehensive support and expertise, the Jenkins successfully secured a construction loan and began building their dream home. Key achievements included:

• Obtained a construction loan with a competitive interest rate 
• Secured a loan amount that covered both land acquisition and construction costs
• Understood the progress payment system and construction stages, feeling confident in managing the process
• Opted for interest-only repayments during the construction phase to manage cash flow, with the option to convert to principal and interest upon completion
• Felt prepared for potential challenges during construction, such as weather delays or minor cost variations

The Jenkins’ new home is scheduled for completion in late 2025, and they’re excited about moving into a house tailored to their exact specifications. They appreciated the guidance through each step of the process, from loan application to final inspection.

If you’re considering building a custom home and need assistance with a construction loan, don’t hesitate to reach out to us for personalised support throughout your home-building journey. Remember that construction loans typically require completion within 12-24 months from the first drawdown, so proper planning and execution are crucial.