A construction home loan is a type of home loan designed for people who are building instead buying an established property. It has a different loan structure to home loans designed for people buying an existing home. A construction loan most commonly has a progressive draw-down.
That is, you draw down the loan as needed to pay for the construction progress payments. The borrowing capacity is often based on the value of the property upon completion of the renovations. A construction loan will usually be interest only over the first 12 months and then revert to a standard principal and interest loan.
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