When is a Building Loan shortfall likely to occur?

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MyProperty
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If the tender amount by the builder reflects a realistic or market-related construction cost to build your dwelling then the occurrence of a shortfall will be highly unlikely. However, if the loan amount approved or required is less than the tender amount, any difference between the loan amount and the tender will have to be paid by the customer from their own funds upfront towards construction progress or the purchase of the land; before the bank will allow any advances from the loan amount. If the tender amount is totally insufficient in relation to a realistic market-related cost to build the dwelling the bank will most probably decline the application upfront or request that the customer supply the bank with another more realistic tender.

A shortfall may occur in the following instances:

  • when the bank's estimated construction cost of what it will take to complete the building is higher than the contract price quoted by the builder
  • when the loan applied for by the customer is less than the contract price
  • due to a combination of the above
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