Construction Loans Australia

A construction loan releases funds in instalments called progress payments, instead of one lump sum. The lender pays your builder as each stage of the build is completed, and you only pay interest on the amount drawn so far. Once the build is finished and the final payment is made, the loan moves to principal and interest repayments. We’ll help you compare lenders and structure the loan around your build.

Progress payments are the stage payments made from your loan to your builder. Construction is typically divided into five stages, usually starting with a deposit and finishing with completion. Your building contract sets the payment schedule, and the lender normally releases each payment once the stage is done and any required inspection or sign-off is complete. Stages and rules vary slightly between lenders and builders, and some lenders charge a fee per drawdown.

It varies by lender and your situation. A typical deposit is around 10% to 20% of the total project cost, though some lenders may need more, particularly for owner-builders or larger projects. If you already own the land, the equity in it may count toward your deposit. We’ll check what each lender accepts before you sign a building contract.

It’s a valuation of your property based on what it will be worth once the build is finished, not what it’s worth today. The lender uses it to estimate the market value of the land and proposed build before approving your loan. It helps decide how much you can borrow, so it’s worth understanding before you finalise your plans and contract. If the valuation comes in below your total build cost plus land, you may need to contribute extra equity.

No. You only pay interest on the amount that has been drawn. For example, if you’ve drawn $100,000 from a $300,000 loan, interest is charged on the $100,000. Your repayments increase as more funds are released. Variable rates can also change during the build, so it’s worth planning for that.

Often yes, for major renovations, extensions or knockdown-rebuilds. Lenders will usually want to see a detailed building contract, council approvals where required, and a registered builder. Smaller cosmetic renovations are usually better suited to a different type of loan, such as a top-up or redraw. We’ll look at your plans and recommend the right structure.

It’s possible, but harder. Owner-builder construction loans are harder to obtain and typically need a significantly larger deposit. Fewer lenders offer them, and they usually require extra documents, such as an owner-builder permit, plans and costings. We’ll tell you early if it’s likely to work, so you’re not caught out later.

Once the lender does a final inspection and approves, your construction loan typically converts to a standard home loan, and repayments move from interest-only to principal and interest. Some lenders let you stay on interest-only for a set period, depending on the loan. This is also a good time to review your rate and loan features, and we can help with that.

Council fees and approvals

Site costs, such as soil tests, retaining walls and drainage

Landscaping, fencing, driveways and window coverings

Lender fees, such as valuations and progress payment fees

Variations to your building contract

A buffer for cost increases