Construction loan

To cover ongoing costs during the construction period.

Couple looking at colours for their home

Guidance from a specialist in construction financing
Tailored solution for your project

What are construction loans?

For large projects, construction loans are often part of the financial solution. A construction loan covers ongoing costs during the building period, and the payments follow the progress of the home. When the home has a certificate of completion, the building loan is converted into a home loan.

We always consider every loan application individually. The price you get is based, among other things, on debt-servicing capacity, security and risk.

Price example, Construction loan

Nom. rente fra 8,25 %, eff.rente ved 100% utnyttelse, fra 9,82%. Lån kr 2 000 000 innfris etter 1 år. Kostnad kr 196 400, totalt kr 2 196 400. Requires a collateral in a home.

Parts of building financing can often be made with other types of loans, such as land mortgages and intermediary financing. These have lower interest rates. When the construction period ends, the building loan is converted to a normal home loan, and if the home is given energy class A or B, a particularly favourable interest rate will be given with a Green Home loan

We will assess each individual application individually. Contact us for offers.

Benefits of building loans

Our dedicated building loan advisers monitor you throughout the process and give financial advice
We help you clarify the financial framework and ensure good control during the project
The bank can provide the contractor with a financing certificate
We guide you in relation to formal requirements being met, such as a guarantee from the contractor
We can offer insurance for buildings during construction

Questions and answers

Who is the Construction loan for?

What is required to get a construction loan?

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.

Can I change my mind about the construction loan agreement?

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.

Interest and commission

You’ll pay interest on the credit you’re using at any one time. In addition to the interest rate, you pay commission every quarter. The commission is calculated on the entire credit limit.

The credit normally runs for one year, and the bank’s funding costs may change. Therefore, under the agreement, the bank is entitled to change your loan interest rate. The bank will thus be able to change the interest rate at any time, both up and down. If the interest rate increases, you will be notified six weeks before the interest rate changes. The same applies to commission rates and ongoing costs.

Do you own a plot of land or have plans to buy a vacant plot?

What happens if the project becomes more expensive than the agreed credit limit?

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.

What happens if I’m not able to repay?

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

The construction journey – tips and advice

Financial framework

Contact the bank and, together with the adviser, you can find out what financial framework you have in relation to your plans. In relation to this, you should have thought through the following:
Is an architect going to design your home or will you buy a pre-fabricated house?
How much space in the house do you need now and in 10 years? Will you rent out part of the house?
If you have a home to sell, it’s a good idea to have a valuation ready
Take into account both planned changes and unforeseen events that may lead to increased costs during the construction period.
Next step

Choosing a supplier

Here are some tips for making a good choice:
Check with acquaintances and search online for information about the craftsmen and companies you want to use
Check with the Brønnøysund Register Centre to see how long the company has been registered and whether any comments have been entered
Obtain quotes with references from several of the most suitable housing suppliers
Check that the company has central approval, is affiliated with an industry organisation and that construction workers have trade certificates and are certified
Use Norwegian standard contracts
Get cost estimates and ask for a primarily fixed price
Do not sign until you have gone through the contract with the bank!

Review of contract before signing

Use the standard building form in accordance with The Norwegian Housing Construction Act.
Include completion date and agree a daily penalty in the event of a delay.
Include the total amount you will pay the contractor.
Agree how the settlement will be made. If the agreement is for a new home with land, a full or partial advance payment can only be requested after the proprietary right has been transferred to you, or your payment has been secured through a bank guarantee.
The contractor will provide security for the fulfilment of the agreement and any claims arising in the first five years after the takeover. Such collateral is especially important if the contractor should go bankrupt.
Remember to include all the specific requirements/requests you have in the home
Use the surveyor/construction inspector to review the contract.
Consider this in relation to the financial framework together with the bank’s adviser.
Agree supplementary work and work you’ll do yourself, as well as a detailed description of the work.
Include insurance requirements.
The construction loan case will be finalised at the bank. A building contract can then be signed.

Building permit

The construction process

Construction time and progress checks vary according to your house type and choice of contractor.
The property developer and contractor must report the progress so that the construction loan is used for actual added value to the building.
The bank will be informed how much work has been carried out and what remains
Normally, 3-4 building checks are required during the construction period.
It is important that the house is insured during the construction period.
Wet rooms and airtightness must be checked by the surveyor/building inspector

Finished building

Other loans

The construction journey – tips and advice

Financial framework

Contact the bank and, together with the adviser, you can find out what financial framework you have in relation to your plans. In relation to this, you should have thought through the following:
Is an architect going to design your home or will you buy a pre-fabricated house?
How much space in the house do you need now and in 10 years? Will you rent out part of the house?
If you have a home to sell, it’s a good idea to have a valuation ready
Take into account both planned changes and unforeseen events that may lead to increased costs during the construction period.
Next step

Choosing a supplier

Here are some tips for making a good choice:
Check with acquaintances and search online for information about the craftsmen and companies you want to use
Check with the Brønnøysund Register Centre to see how long the company has been registered and whether any comments have been entered
Obtain quotes with references from several of the most suitable housing suppliers
Check that the company has central approval, is affiliated with an industry organisation and that construction workers have trade certificates and are certified
Use Norwegian standard contracts
Get cost estimates and ask for a primarily fixed price
Do not sign until you have gone through the contract with the bank!

Review of contract before signing

Use the standard building form in accordance with The Norwegian Housing Construction Act.
Include completion date and agree a daily penalty in the event of a delay.
Include the total amount you will pay the contractor.
Agree how the settlement will be made. If the agreement is for a new home with land, a full or partial advance payment can only be requested after the proprietary right has been transferred to you, or your payment has been secured through a bank guarantee.
The contractor will provide security for the fulfilment of the agreement and any claims arising in the first five years after the takeover. Such collateral is especially important if the contractor should go bankrupt.
Remember to include all the specific requirements/requests you have in the home
Use the surveyor/construction inspector to review the contract.
Consider this in relation to the financial framework together with the bank’s adviser.
Agree supplementary work and work you’ll do yourself, as well as a detailed description of the work.
Include insurance requirements.
The construction loan case will be finalised at the bank. A building contract can then be signed.

Building permit

The construction process

Construction time and progress checks vary according to your house type and choice of contractor.
The property developer and contractor must report the progress so that the construction loan is used for actual added value to the building.
The bank will be informed how much work has been carried out and what remains
Normally, 3-4 building checks are required during the construction period.
It is important that the house is insured during the construction period.
Wet rooms and airtightness must be checked by the surveyor/building inspector

Finished building

Construction loan

What are construction loans?

Price example, Construction loan

Benefits of building loans

Questions and answers

The construction journey – tips and advice

Other loans

Home mortgages

Pre-qualification letter

Bridge financing

Home equity credit lines

Construction loan

What are construction loans?

Price example, Construction loan

Benefits of building loans

Questions and answers

The construction journey – tips and advice

Other loans

Home mortgages

Pre-qualification letter

Bridge financing

Home equity credit lines