Construction Loans

A construction loan is a type of home loan specifically designed for people building a new home or completing major renovations. Unlike a traditional home loan, the funds are released in stages (called “progress payments”) as the build progresses.

Instead of receiving the full loan upfront, your lender releases funds in instalments at key stages of construction—such as slab, frame, lock-up, fit-out, and completion. You only pay interest on the amount drawn down, which can help manage cash flow during the build.

Yes. Most lenders require finalised building contracts, council-approved plans, and a fixed-price building contract before issuing formal approval for a construction loan.

Most construction loans start as interest-only during the build, which helps keep repayments lower while you’re not yet living in the property. Once construction is complete, the loan typically reverts to a standard principal & interest loan.

Your builder will issue invoices at each stage of construction. You or your broker will forward these to the lender, who will inspect the progress and then release payment directly to the builder.

Yes, if you have sufficient usable equity in an existing property, it can be used to help fund the deposit or construction costs—reducing or eliminating the need for cash upfront.

Lenders will only finance up to the approved loan amount. If the cost of the build increases beyond the original contract, you’ll need to cover the shortfall yourself. It’s important to factor in a buffer for unexpected costs.

Some lenders offer loans for owner-builders, but lending criteria are usually stricter, and you’ll often need a larger deposit. Most lenders prefer a licensed builder with a fixed-price contract.

Lenders base the loan on an “as if complete” valuation—this means they assess the estimated value of the home once construction is finished, based on the building plans and specifications.

Construction loans can be complex, with more moving parts than a standard mortgage. A broker can guide you through the process, liaise with the builder and lender, compare policies across multiple banks, and ensure your loan is structured correctly from day one.