How construction loans work
Unlike a standard home loan where you receive the full amount at settlement, construction loans release funds progressively as your build reaches specific stages. Understanding this process helps you plan your project and avoid delays.
Progress draw system.
Your loan is drawn down in stages, typically five or six, aligned with construction milestones: slab, frame, lock-up, fit-out, and completion. You only pay interest on the amount drawn, not the full loan.
Builder and contract requirements.
Lenders require your builder to be licensed and insured. Most also require a fixed-price building contract that outlines the work, cost, and timeline. We review your contract for lender compatibility.
Valuations and inspections.
Before releasing each progress payment, the lender confirms the work has been completed. We coordinate this process to minimise delays between your builder invoicing and funds being released.
Interest during construction.
During the build, you pay interest only on funds drawn so far. Once construction is complete, your loan converts to a standard home loan with full repayments.
Variations and contingencies.
Builds often encounter unexpected costs. Lenders may require a contingency buffer, and we help you plan for realistic scenarios.
Construction finance for different projects
Land and construction package
Buying land and building a new home, either as separate transactions or a house and land package. We structure the finance to cover both the land purchase and subsequent construction, with appropriate timing for each stage.
Knockdown rebuild
Demolishing an existing home to build new on the same site. This involves financing the demolition, managing any existing mortgage, and funding the new construction. We coordinate the sequence and timing.
Building on land you own
You already own the land and want to build. Your existing land becomes security for the construction loan. We assess your equity position and structure the finance for your build.
Major renovations
Significant structural work or extensions requiring council approval and staged payments to builders. Not all renovations need construction loans, but larger projects often do. We assess which approach suits your project.
Owner builder
Managing the construction yourself without a licensed builder. Owner builder loans are more restricted, with fewer lenders and lower loan-to-value ratios. We explain what is involved and whether this path is realistic.
