Construction

Clients can choose an interest only loan construction period of up to 15 months. During this pre-construction and construction phase, the loan will be serviced as an interest only loan. An upfront, annualised Construction Risk Fee applies, covering the client’s selected interest only period.

For example, if a client opts for a 15-month interest only construction period, the upfront annualised Construction Risk Fee will cover the entire initial 15 months, even though the fee is annualised. As a result, the client will not incur charges for the 13th, 14th, and 15th months.

If construction is not completed within the 15 months, an additional monthly Construction Risk Fee will be charged starting from the 16th month until construction is finished. This additional monthly Construction Risk Fee is calculated as follows:

( Loan Amount * Construction Risk Fee ) / 12 months

On completion of construction, the loan typically converts to a principal and interest loan unless the client expresses seeks an extended IO term which is then approved.

Worked example on an owner occupied ≤ 75% standard residential build

• Construction loan amount = $700,000
• Construction Risk Fee = 0.5%
• Client selects the full 15-month IO period
• Upfront annualised Construction Risk Fee amount payable = ($700,000 * 0.005) = $3,500.00

If the construction period extends beyond 15 months, then the monthly Construction Risk Fee in the amount of ($700,000 * 0.005)/12 = $291.53 is added to the loan balance.