Building your own home has the befit of letting one develop the property of your dreams.  It also brings with it additional problems.  Banks have developed a specific loan product to cater for construction of ones home: the building bond.

 A building bond is essentially defined as a loan that allows for periodic payouts at certain key points during the building process.  This differs from other forms of loans which are paid in full on transfer of the property. 

In addition to the normal documents required by the bank to approve a bond, there will be additional documents that are specific to a building bond. Perhaps the single most important aspect of a building bond is to understand the way in which the facility operates.  The ultimate value of the property on completion is important but not the primary consideration that determines what draw’s will be allowed.  At all times, the financial institution will “retain” an un-drawn balance that is equivalent to the banks estimate of what it may cost to complete the project. The importance of this is that you or your builder must have sufficient working capital to bring the construction to the point where the bank will be prepared to allow a draw.  If you are in any doubt, please discuss this aspect with your consultant or the bank.