Construction Loans
What is a Construction Loan?
A Construction Loan is a short-term mortgage designed to finance the building of a new home, an extension, or a minor dwelling. Unlike a traditional mortgage, which provides a lump sum for purchasing an existing property, a construction loan releases funds in stages as construction progresses. This approach ensures that you only pay interest on the portion of the loan that has been disbursed.
Silverstone Financial will help you in this process from start to end, offering expert guidance to help you understand the best loan options and manage the loan release stages, so you can focus on the construction process without the financial stress.
Why Do I Need This Service?
Building your dream home can be complex, but a construction loan simplifies the financial aspect. Here’s how:
Tailored
Financing
Obtain funds specifically for each stage of construction, from land purchase to final touches.
Interest-Only
Payments
During the construction phase, make interest-only repayments, reducing your financial burden until the build is complete.
Progressive Drawdowns
Funds are released in stages, typically aligned with construction milestones, ensuring payments are made as work is completed.
Long-Term Pre-Approval
Many lenders offer conditional pre-approval, allowing you to secure financing before finalizing your land purchase or builder contract.
How Much Can I Borrow?
- 80% of Property Value
Most lenders can lend up to 80% of the property’s value upon completion.
- Up to 90% for Owner-Occupied Homes
If you’re building to live in the home, banks may approve lending up to 90% of the completed value.
- Loan Limit of 70% of Project Cost
Banks may limit their loan to 70% of the total project cost at any given time.
- Contingency Buffer
Due to unforeseen costs, banks typically factor in an additional 10% to 15% contingency in your borrowing power to cover cost overruns, delays, or unexpected expenses.
Documents You'll Need
To apply for a construction loan, you’ll typically need to provide:
- House Plans
Architectural drawings approved by the local city council.
- Fixed Price Building Contract
A signed agreement with your builder detailing the exact cost and scope of work.
- Building Consent Approval
Formal approval from the local city council to commence construction.
- Resource Consent Approval
If applicable, approval for land use and environmental considerations.
- Registered Valuation
An assessment of the property’s value upon completion.
- Builder's Risk Insurance
Coverage to protect against potential damages during construction.
- Rental Appraisal
If you plan to rent the property, an appraisal estimating potential rental income.
These documents help lenders assess the viability and value of your construction project.
Why Choose Silverstone Financial for Construction Loans?
In-Depth Knowledge of Build Loans
Construction finance can be tricky. We’re experienced in progress payments, valuations, and lender requirements at every stage of the build.
Support for Owner-Builders and Developers
Whether you’re building your dream home or developing a project, we structure the right loan to fit your timeline and cash flow.
Risk Management
Built-In
We ensure your loan considers contingencies, overruns, and potential delays — so you’re not caught off guard.
Hands-On
Approach
From concept plans to final drawdowns, we work closely with your builder and lender to keep everything moving smoothly.