Construction loans have different structures, rates and are generally more complex as they come with more lender involvement compared to standard home loaners.
This added complexity means that construction loans come with more lender involvement than standard home loans. Lenders will ask to review your plans for building the property, including the estimated schedule and budget.
Once you’ve secured a loan, lenders will pay the builders in varying intervals, following each phase of construction. Payment frequency is organised into a draw schedule decided between you, your lender and builder. The lender will usually check on the progress of construction at each scheduled step, before releasing payment.
Prior to construction, you are only required to make interest-only payments for construction loans. Repayment of the original loan balance only begins once the home is completed, like a standard mortgage plan.