Construction Loans

Reduce the stress and frustration of obtaining a construction loan when you work with the experts at Donkey Finance. Get the help you need now!

Construction loan as a financing option

When you are going to be building and need construction finance, then it’s important to trust our team of uk experts. We understand how to provide you with building loans and construction loans so that you can afford to build the home of your dreams.

At Donkey Finance, we understand the importance of solid underwriting so that you are able to get great rates on your building finance, allowing you the freedom to borrow as much as you want while resting secure in the knowledge that paying it back won’t be a problem. Instead of working with a company that sees you only as a number, when you work with us, you can rest easy knowing that you’ll have a great and personalised experience when getting your home building loan.

Construction loans are a specialist development finance product. Let our AI software compare rates for development finance against high-street banks and other institutions:

Construction loan example

Before signing a contract for a construction loan, it’s important that you understand how they work to ensure that you know the ins and outs of the process.

When a construction loan may be required

When you are going to be building a new home, it’s important that you secure a construction loan to have the money you need. While this may seem easy, it’s important that you understand the construction loan process and requirements before you get started so that you are prepared for what is to come.

While every company has different construction loan requirements, to get a loan, you will have to meet their qualifications. Just like obtaining a mortgage, construction loan qualification will include showing your income and debit information to the lender to prove that you can pay back the money you borrow.

Construction loan drawdown schedule

Because your builder will need to be paid in order to buy materials and pay contractors, your loan will be given in a series of “draws.” This construction loan draw schedule allows them to get the money that they need during construction, so they are able to continue with construction.

In order to obtain the draws, there are usually inspections to ensure that the building process is moving along smoothly and in the way that it should.

At the end of the build, there is a final inspection that confirms that construction is complete and that the home is suitable for a person to live in.

How a construction loan works

When looking for financing, you have to make sure that you have enough for a construction loan down payment, or you will find it very difficult to get the money that you need. After proving that you are qualified for the loan, you will have to find a builder who is going to be able to build your new home in the time frame set by the lender. Depending on what kind of construction loan you have chosen, the home construction loan process will vary a little. While one type of loan will convert to a regular mortgage at the end of construction, the other will require you to obtain a mortgage before moving into your home and after construction is complete.

While the home construction loan process may seem overwhelming, we are here to help you through the process and make it as easy and stress-free as possible. No matter where you are in the planning process, if you are considering a construction loan or have questions about construction loans and how they work, we are here to help.

Construction loan types

Most people know that there are two types of construction loans, but many do not know which is right for them. Get the information and financing you need.

When choosing between the two different types of construction loans, it’s important that you have all of the information you need to make an informed decision. While some people benefit from using construction for permanent loans, others need stand-alone construction-development loans.

It can be tricky for the average person to decide what kind of loan is best for them and will meet their needs, so at Donkey Finance, we specialise in helping our customers find a construction loan for renovation or for a new construction project.

• Construction to permanent loans: When you choose construction over permanent loans, you will immediately enjoy the benefit of only having to pay for closing once. These loans have variable interest rates that will change during construction. When you choose a construction-to-perm loan, you only have to pay interest on the balance due. After the build or renovation is complete, the construction perm loan will convert into a regular mortgage. You will have to compare and find the best rate to ensure that you’re not overpaying on your mortgage when this time comes.
• Stand-alone loans: Your other option for construction development finance is a stand-alone loan, sometimes known as a construction bridge loan. While you will have to pay for two sets of closing fees and can’t lock in a maximum mortgage rate the way that you can with a construction permanent loan, you don’t have to have as much money ready for a down payment, which many people find helpful. This is great if you are going to sell your current home when your new one is completed and pay off the balance that way. There are some major benefits to construction bridge loans, but there is always the concern that you will not be able to secure a mortgage at the end of the construction process. This is especially true if your finances take a turn for the worst during construction, and this can leave you without a way to pay for your new home.

Knowing what kind of finance option is right for you tends to be rather tricky, and that’s why our customers are provided with help to make the right decision. We’re happy to talk to you about your needs and current situation to ensure that you get the right kind of financing and are able to build the home that you’ve always wanted, no matter what kind of construction loan you need.

Construction Loans for Builders

Construction loans are essential financial tools for builders looking to fund new projects or renovations. These short-term loans provide the capital needed to cover the costs of materials, labour, and other expenses during the construction phase. Typically, they are disbursed in stages, or “draws,” aligned with project milestones to ensure funds are available as work progresses. With interest rates often higher than traditional mortgages and the need for a detailed construction plan, builders must carefully manage these loans to stay within budget and timelines. Upon completion of the project, the construction loan is usually converted into a long-term mortgage, providing a more stable repayment structure.

Applying for a loan

Applying for a construction loan has never been easier, as we have worked hard to streamline and simplify the process for our customers. This means that once we have your information, we will do all of the work to provide you with a great building loan.

We understand that you are in the market for the cheapest construction loan, and we offer very competitive rates as well as quality underwriting so that you get the most money for your payments.

Use our construction loan calculator to make your application.

After approval

Once you have been approved for your construction loan, it is easy enough for your builder to access the money that they need in order to complete your building project without you having to deal with the hassle of draws and getting permission to move forward for each stage of the build. These “draws” allow money to be taken out of the budget to pay for contractors and materials, which means that your construction is always moving forward.

Whether you are interested in construction development finance for home renovation or a construction loan to build a house, we can help you get the money that you need. Regular inspections of the building as well as open communication are important, which is why so many customers trust us as their construction loan lender.

We know that building is very exciting but can also be very stressful, and we work hard to help you get a construction loan and build the home of your dreams. Whether you need large or small construction loans or are looking for a short-term construction loan, we are here to help get you the money that you need in order to bring your dreams to life.

Construction loan FAQs

You probably have a lot of questions if you are considering a construction loan. Get the answers you need here to put your mind at ease.

How can I get a construction loan?

The best way to start the process of obtaining a construction loan to build a new home or renovate your current house is to work with a company that specialises in this type of work. After deciding who you are going to work with and what kind of construction loan you need, be ready to bring all of your documents to show that you are financially able to repay the loan. At Donkey Finance, we can answer all of your questions and simplify the process for you to make it as seamless as possible.

How long does it take to get a construction loan?

The process to get a construction loan usually takes between one and two months, depending on how busy the loan officer is, how prepared you are with documents, and how quickly the company you hire to provide you with a loan is able to close. While some construction loans can be completed and closed in under a month, the normal time is a lot longer due to delays and the importance of having the right information for the loan.

How do construction loans work for renovations?

Financing your home renovation is easy when you opt for a construction loan. While most development loans are used for a new build, you can use a construction loan to finance renovation work as well, but you have to be prepared. Make sure that you know exactly how much money you need and how long the work will take, and that you already have someone ready to start the renovations as soon as you have approval. The building company will then take draws on the money, just like when building a new home, to pay for materials and labour.

What are the requirements for a construction loan?

Having the right information will make getting a construction loan a lot easier. You will need a comprehensive plan of the build as well as a layout of the construction for the lender. Depending on the type of financing you choose, you may need to make a down payment. Appraisals during the build are necessary, and you will have to meet all the eligibility criteria, including credit, ability to repay, employment, and other factors.

What credit score is needed for a construction loan?

The credit score that you will need to obtain a construction loan will vary depending on how much money you are going to borrow. The higher the amount of the loan, the higher your credit score needs to be. It is not uncommon for lenders to look for scores of 680 or higher.