Construction Loans
Build your dream home
Construction loans work differently to regular home loans. Instead of one lump sum, funds are released in stages as your build progresses. We'll guide you through the process and manage the drawdowns.
The Process
How construction loans work
Unlike a standard home loan, construction loans release funds in stages as your build progresses.
Land purchase
If you're buying land separately, we arrange finance for the land purchase first. You start paying interest on this amount.
Loan approval
We get your construction loan approved based on your builder's fixed price contract and plans. The full amount is approved but not drawn yet.
Progress payments
As construction progresses, your builder invoices for completed stages. We arrange payments and you only pay interest on drawn funds.
Completion
Once construction is complete and you have your certificate of occupancy, the loan converts to a standard home loan.
Progress Payments
Typical drawdown stages
Your builder will invoice at each stage of construction. These percentages are typical but can vary based on your contract.
Note: You only pay interest on funds that have been drawn down, not the full loan amount.
Requirements
What you'll need
Fixed price building contract
Most lenders require a fixed price contract from a licensed builder. This protects you and the lender from cost overruns.
Council-approved plans
Your building plans must be approved by the local council before the lender will release funds.
Builder's insurance
Your builder must have appropriate insurance (Home Building Compensation Fund or equivalent).
Adequate deposit
Typically 10-20% of the total cost (land + construction). Can sometimes use equity in existing property.
Tips
Construction loan tips
Get your finance approved first
Construction loans have stricter requirements. Get pre-approval before signing a building contract.
Include a contingency buffer
Even with a fixed price contract, allow 5-10% for variations, upgrades, and unexpected costs.
Understand progress payments
Know the payment schedule and ensure you can cover any gaps between drawdowns and builder invoices.
Check builder credentials
Ensure your builder is licensed, insured, and has a good track record. Lenders may have builder requirements.
Lock in your rate if possible
Construction can take 6-12+ months. Consider locking in your rate to protect against rises.
Plan for the interest-only period
You'll pay interest on drawn funds during construction. Budget for potentially paying rent/mortgage plus construction interest.
Options
Land & build packages
Many builders offer combined land and build packages which can simplify the process. We can arrange finance for:
- House and land packages from project home builders
- Separate land purchase followed by construction
- Knockdown rebuild on existing land
- Custom builds with your own architect and builder
Need land first?
We can help you secure finance for the land while you finalise your building plans. The construction loan is then added once your plans and contract are ready.
Discuss your optionsReady to build?
Let's discuss your construction project
Book a free consultation and we'll guide you through construction finance.