Building your dream home while working FIFO comes with unique challenges, especially when it comes to construction loan settlement. Unlike standard home loans, construction loans operate on a progressive drawdown system that requires careful planning and understanding of the settlement process.
What Makes Construction Loan Settlement Different
Construction loan settlement isn't a single event like purchasing an existing property. Instead, it involves multiple settlements throughout your build, with funds released at various stages of the project. This progressive payment schedule means you'll only charge interest on the amount drawn down, rather than the full loan amount from day one.
As a FIFO worker, this structure can actually work in your favour, particularly if you're managing cashflow between rosters. The interest-only repayment options available during construction help keep costs manageable while your home takes shape.
Understanding Progressive Drawdown
The progressive drawdown system releases funds in instalments as construction milestones are reached. Your Finance & Mortgage Broker will help you access Construction Loan options from banks and lenders across Australia, each with their own payment structures.
Typical drawdown stages include:
- Deposit and site preparation - Usually 10-15% of the total loan amount
- Slab completion - Around 15-20% of remaining funds
- Frame stage - Typically 25-30%
- Lock-up stage - Another 25-30%
- Fixing stage - Remaining balance less final retention
- Final completion - Final 5-10% released after handover
Each bank handles these payments differently, and some may require additional payments for specific trades like plumbers and electricians, or to pay sub-contractors directly.
The Settlement Process Step by Step
Before any settlement can occur, you'll need council plans and permits approved, plus a registered builder under contract. The lender will also require an 'as if complete' valuation, which estimates your home's value once construction finishes.
Your streamlined application process begins with establishing your loan amount and interest rate. FIFO workers often face additional scrutiny during applications, but specialist brokers understand your income patterns and can present your application effectively.
Once approved, you'll typically have a period to commence building within a set period from the Disclosure Date - usually 6-12 months depending on your lender.
Managing Payments and Inspections
At each construction milestone, your lender will arrange an inspection before releasing funds. This protects both you and the lender, ensuring work meets required standards before payment.
Be aware of Progressive Drawing Fees - most lenders charge between $300-$500 for each drawdown inspection and payment. Factor these costs into your budget when applying for a loan.
Some lenders offer flexibility for Out of Contract Items not included in your fixed price contracts. This can cover upgrades or changes during construction, though approval processes vary between institutions.
Planning Your Construction Journey
Whether you're considering major home renovations, buying off the plan, or planning a new build after you demolish existing property, having a solid plan is crucial. Consider these factors:
- Location requirements - Check council restrictions and council regulations early
- Price range - Factor in all costs, not just the build
- Suitable land - Ensure your ideal location meets building requirements
- Development application - Some projects need additional approvals
House & land packages can offer more predictable settlements, as the developer handles much of the complexity. However, custom builds give you more control over the final product.
FIFO-Specific Considerations
Working FIFO during construction settlement requires extra coordination. You might miss inspection appointments or need to arrange power of attorney for certain transactions. Discuss these requirements with your broker early in the process.
Some FIFO workers consider home improvement loan options for smaller projects that don't require the complexity of full construction finance. These might suit bathroom renovations or extensions while you're between rosters.
Making Settlement Work for You
Construction loan settlement doesn't have to be overwhelming. With proper planning and the right broker support, FIFO workers can successfully manage the process even while away on roster.
Key success factors include:
- Understanding your Progressive Payment Schedule upfront
- Maintaining communication with your builder and broker
- Planning for additional costs beyond the base contract
- Ensuring adequate insurance coverage throughout construction
Remember, construction loans eventually convert to standard home loans once building completes. Your broker should discuss this transition during your initial consultation, including rate options and repayment structures post-completion.
Call one of our team or book an appointment at a time that works for you. We understand the unique challenges FIFO workers face and can guide you through every aspect of construction loan settlement.
