Construction loan

A construction loan is suitable when you are either building a house or a holiday home/cabin. Construction loans can also be suitable when you’re carrying out extensive home refurbishment. Contact us for advice about your situation.

Check what the zoning plan is with the local municipality. Remember to think about the costs for groundworks and blasting.

When you apply for a construction loan, the bank requires the submission of documents related to the building. This will include building drawings, building permits, financing plans, documentation of debt-servicing capacity and similar.

Once the bank has approved the application and received all necessary papers back from you with the correct signatures, the construction loan will be made available.

The construction loan will be issued when you receive the invoice for the building works, approve it and then send it to the bank for payment.

Often, it is required that a appraiser review the building accounts, check invoices and ensure that there is consistency between the values put into the building and the deduction in the construction loan account. The construction loan can only be used for costs that are directly related to the building work. If other costs are financed via the construction loan this will considered a breach of contract.

The agreed credit limit must not be exceeded. If you want to change the plans so that the project becomes more expensive, or unforeseen events occur, you need to discuss this with the bank as soon as the situation arises. Therefore, keep the bank informed on an ongoing basis of all changes to the construction plans, such as progress, costs, major changes to construction plans and changes to drawings.

In most cases, you will be able to change your mind about the home equity credit line within 14 days. You must pay interest for the time you have used the credit. The registration fee will not be refunded.

You can choose to terminate the agreement on construction loans and pay off the loan balance at any time. This is also a form of "cancellation right". In the event of such a repayment, you’ll pay interest on the credit you’ve used until you’ve repaid it. However, you will not receive the bank’s fees or other costs back.

Get in contact with the bank as soon as possible if you’re not able to pay the instalments on the construction loan. Together we’ll find a solution that will help you in your situation.

If you default on the loan, the bank will calculate the interest on overdue payments of the term after the due date. Interest on overdue payments is set by public regulations, and in practice is higher than the agreed interest rate you have on the Construction loan. If the default is significant, for example if multiple instalments are not repaid, the bank has the right to terminate the Construction loan. Interest on overdue payments will then be calculated on drawn amounts on the Construction loan. In addition to interest on overdue payments, fees will also apply, in accordance with the rules of the Debt Collection Act.

In the event of a breach of the Construction loan, you risk the bank demanding the sale of any collateral that you or others have placed as security. As the borrower/co-borrower, you will be responsible for the loan until the entire Construction loan is cleared.

In special cases, the bank has the right to demand that the credit be paid back in full after 14 days’ notice. For example, this applies if you significantly default on the credit agreement, you go bankrupt or if you were to die. The bank will then issue the borrower, potentially the heirs, a deadline to rectify the situation.

In some cases, the bank may demand that the credit be repaid in full at short notice. The bank can block further withdrawals and demand that things are brought into line before the credit is made available again