Construction Loans Australia

How it works

Construction loans are different to standard home loans

With a regular home loan, the lender advances the full amount at settlement and you start repaying immediately. Construction finance doesn't work that way. The loan is drawn down in stages as construction progresses, called progress payments or draw-downs.

This means you only pay interest on the amount that's been drawn down, not the full loan balance. That's actually a benefit during the build. But it also means more complexity, more paperwork, more lender interaction, and more coordination between you, your builder, and the lender.

The typical progress payment schedule

Base stage (slab down), typically 10–15%

Foundation and slab completed. First draw-down triggered after builder's invoice and valuation.

Frame stage, typically 15–20%

Structural frame, roof framing and wall frames complete. Second draw-down.

Lock-up stage, typically 20%

External walls, windows, doors and roof covering in place. House is now weatherproof.

Fixing stage, typically 20%

Internal fixtures, fittings, plasterboard, kitchen cabinets, baths, sinks installed.

Practical completion, typically 25–35%

Build complete, final inspection, handover. Full loan balance activated, repayments switch from IO to P&I.

What you need to get approved

Registered building contract with a licensed builder
Approved council plans and permits
Fixed-price contract (most lenders require this)
Builder's insurance certificates
Land contract (if not already owned)

First Home Buyer building?

If you're building your first home, you may be eligible for the First Home Owner Grant (FHOG). The amount, price caps and eligibility rules are set by each state and vary a lot, from none at all in some places to a substantial grant in others, so check your own state's current figure rather than a generic number. The grant is usually paid at the first progress draw-down. See the FHOG details on your state's page: NSW, VIC, QLD, WA, SA, ACT, TAS, NT. I'll confirm exactly what you're entitled to before you apply.

Why construction loans need a specialist

Not all brokers understand construction finance well. The draw-down process, the interaction with valuers, managing lender conditions, timing of payments to your builder, these all require someone who's done it before. We coordinate the whole thing, which means your builder gets paid on time and your loan progresses without delays.

FAQ

Construction loan questions

No, you can purchase land and fund the construction in a single loan, sometimes called a land and construction loan. The land purchase settles first, then the construction component is drawn down in stages. Some lenders require you to own the land before approving the construction, so we'll match you to the right one.

Yes, knockdown rebuilds use the same construction loan structure. You'd already own the land so it's purely the construction component. The demolished dwelling value is excluded from the valuation, so it's based on the end-value of the new build.

If the build cost increases beyond your approved loan amount, you'll need to fund the difference from your own resources, or apply for a loan top-up. This is why fixed-price contracts matter, they give the lender (and you) certainty about the build cost. We'll discuss contingency planning before we submit your application.

Typically 5–10% of the total land + construction cost. With less than 20%, you'll pay LMI. The land value counts toward your equity position, so if you already own land with equity, your deposit requirement is reduced accordingly.

Construction loans are different to standard home loans

The typical progress payment schedule

What you need to get approved

Why construction loans need a specialist

Construction loan questions

Let's get your constructionfinance sorted.

Let's get your construction
finance sorted.