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Build Invest GrowDaniel Kotevski

Construction Loans — Building Your Dream Home

Building a home is an exciting project, but the finance works differently to a standard purchase. We guide you through the process so you can focus on the build.

How Construction Loans Work

Unlike a standard home loan that gives you the full amount at settlement, a construction loan releases funds in stages as your build progresses. Each stage is tied to a milestone in your building contract — slab, frame, lock-up, fit-out, and completion.

During construction, you only pay interest on the amount that has been drawn down, not the full loan. Once your home is complete, the loan rolls over to a standard home loan with regular repayments. This structure keeps your costs lower while you are building.

Progress Payments Explained

Your builder will invoice you at each stage of construction. Before the lender releases the funds, they send a valuer or inspector to confirm the work has been completed to the required standard. This protects both you and the lender.

The process is straightforward but requires coordination between you, your builder, and the lender. We act as the go-between to make sure draw-down requests are processed quickly so your builder gets paid on time and your project stays on track.

Land and Build Packages

If you are purchasing land and building on it, you can often wrap both into a single loan. The land settles first, and the construction component activates once building begins. This avoids the hassle and cost of managing two separate loans.

Timing is important with land and build packages. There is often a gap between settling on the land and starting construction, during which you will be paying interest on the land loan. We help you plan the timeline so you are not carrying unnecessary costs.

Owner-Builder Considerations

Managing your own build can save money, but getting finance as an owner-builder is harder. Lenders see more risk without a licensed builder overseeing the project, so they typically lend less (60% to 70% of total project cost) and scrutinise your plans and budget more closely.

You will need an owner-builder permit, detailed plans and specifications, council approval, a realistic cost breakdown, and ideally some building experience or qualified tradespeople lined up. Not all lenders offer owner-builder loans, but we know which ones do and how to present your application to give it the best chance.

How We Help You Build

From plans to progress payments, we make the finance side simple.

1

Discuss Your Plans

We review your building plans, budget, and timeline to understand what you need from your loan.

2

Assess Your Build Costs

We work through your builder's contract, council requirements, and total project costs.

3

Secure Your Loan

We find a construction loan with the right structure, rate, and draw-down flexibility for your build.

4

Draw Down as You Build

Funds are released in stages as your build progresses. You only pay interest on what has been drawn.

Construction Loan FAQs

A construction loan releases funds in stages (called progress payments or draw-downs) as each phase of the build is completed, rather than as a single lump sum. During the construction period you only pay interest on the amount that has been drawn down. Once the build is complete, the loan typically converts to a standard home loan with regular principal and interest repayments.
Most construction loans use five or six stages: deposit (usually 5%), slab or base (10% to 15%), frame (15% to 20%), lock-up (20% to 25%), fit-out or fixing (20% to 25%), and completion (final balance). The exact percentages depend on your builder's contract. Your lender will send a valuer or inspector to verify each stage before releasing the next payment.
Yes. Many lenders offer combined land and construction loans. The land portion settles first, and the construction component is drawn down in stages as building progresses. This can be simpler than taking out two separate loans. We help you structure the finance so everything aligns with your builder's timeline.
Owner-builder finance is more difficult to secure because lenders see higher risk without a licensed builder managing the project. Most lenders will only fund up to 60% to 70% of the total project cost for owner-builders. You will need detailed plans, council approvals, a realistic budget, and evidence of building experience or qualified tradespeople. We know which lenders consider owner-builder applications.
Most lenders require a minimum 10% deposit for construction loans, with 20% being ideal to avoid LMI. The deposit is calculated on the total end value of the completed build, not just the land. If you already own the land, its equity can count toward your deposit. We work out your position and advise on the best approach.
Cost overruns are one of the biggest risks in construction. If costs exceed your approved loan amount, you may need to fund the difference yourself or apply for a loan variation, which is not always guaranteed. Building a contingency buffer of 10% to 15% into your budget is something we strongly recommend. We also advise using a fixed-price building contract wherever possible to limit your exposure.

Planning to build your dream home?

Book a free consultation and we will walk you through the construction loan process from start to finish.

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