Construction Loans

The loan is paid out in stages, called progress payments or drawdowns, that match the build. The usual stages are deposit, slab or base, frame, lockup, fixing or fit-out, and completion. As each stage finishes, the lender (often after a brief valuation) releases that portion of the loan directly to your builder. You don’t receive the full amount upfront, and you only pay interest on what’s been drawn so far.

No. During the build you pay interest only on the amount that’s actually been drawn down, not the full approved loan. Early on, when only the deposit and slab have been released, repayments are low; they increase as more of the loan is drawn at each stage. Once the home is complete, the loan typically converts to a standard principal-and-interest home loan on the full balance.

It works much like a standard home loan, measured against the on-completion value of the property (land plus build). A contribution that keeps you at or below 80% of that value avoids lenders mortgage insurance (LMI), and smaller deposits are workable with LMI added. If you already own the land, its equity often counts toward your contribution, which can reduce or remove the cash deposit needed. We calculate the exact figure before you sign the building contract.

Most lenders want a fixed-price building contract with a licensed builder, because it sets out exactly what’s being built and for how much. That certainty underpins the on-completion valuation and the staged drawdowns. Cost-plus contracts, where the final price isn’t fixed, are possible but sit with a narrower lender panel and tighter terms. We’ll tell you upfront how your contract type affects the options.

Yes, but they’re harder to arrange. Owner-builder loans (where you manage the build yourself rather than engaging a licensed builder) come with lower loan-to-value ratios, a much smaller lender panel and more documentation, because the lender carries more risk without a builder’s contract and warranties. It’s achievable with the right lender and a solid plan, and we can tell you quickly whether your project is likely to qualify.

Both are common construction scenarios. For a land-and-construction purchase, the land settles first, then the build is funded in stages on top. For a knockdown rebuild, the equity in your existing property usually supports the new build, with the loan structured around demolition and then the staged construction. Each has its own sequencing, and we structure the finance so the land, demolition and build drawdowns line up cleanly.

The lender orders an “as if complete” valuation based on the land value plus your fixed-price building contract and plans. That figure becomes the basis for your loan-to-value ratio. If the on-completion value comes in below the combined land and build cost, the lender may approve less than expected, so we plan for that possibility upfront rather than discovering it late in the process.

After the final stage is drawn and a completion certificate is issued, the loan typically converts from interest-only on the drawn amount to a standard principal-and-interest home loan on the full balance. At that point it behaves like any other home loan, and it’s a natural moment to review whether the rate and structure still suit you. We flag that review as part of our ongoing service.

A standard single-dwelling build often runs around six to 12 months, though it varies widely by size, complexity and weather. Construction loans usually allow a set construction period, commonly up to 12 months, with extensions available if the build runs over. We help you build a realistic timeline into the loan and manage any extension with the lender if delays occur, so a slow trade or a wet winter doesn’t put the finance at risk.