Construction Loans
Building or renovating? Construction loans work differently from a standard home loan, and we guide you through each stage.
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Finance that follows your build
A construction loan is designed for a home that does not exist yet. Instead of paying the full amount at settlement, the lender usually releases funds in stages as your builder completes each part of the work. These releases are known as progress payments, and they are the main reason building finance needs a little more planning than a standard home loan.
We help you understand how the loan will work before you sign a building contract, so the finance and the build run to the same timetable.
What lenders ask for
Before approving a construction loan, lenders generally want to see a fixed-price building contract, council-approved plans and specifications, and details of your builder, including licence and insurance. If you are buying land as well, the land and the build may be financed together or separately. We explain what each lender needs and help you put the documents together in the form they expect.
Planning for the build period
During construction many loans charge interest only on the amount drawn so far, so repayments start small and grow as the build progresses. You may also be paying rent or another mortgage at the same time. We help you plan for that overlap and for a buffer, because variations, site costs and delays are common in building projects.
When the build is complete, the loan usually moves to regular repayments. We talk through that stage at the start, so the loan you finish with suits you as well as the one you began with.
How a MAXLEND broker helps
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Help with the paperwork
We explain which building documents lenders need, and when they need them.
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Lenders suited to building
Not every lender treats construction the same way. We compare those suited to your project.
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A plan for the build period
We help you budget for repayments, rent and a buffer while the home is being built.
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Contact through each stage
We stay involved as progress payments are made, through to completion.
The stages of a construction loan
A clear process from first conversation to settlement, with a MAXLEND broker beside you at each step.
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Plan and budget
We review your plans, building contract and budget, including a buffer for unexpected costs.
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Loan approval
We lodge your application together with the documents the lender requires.
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Progress payments
Funds are paid to your builder at agreed stages as the work is completed.
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Completion
When the build is finished, the loan usually moves to standard repayments.
Before you build
Most lenders want a fixed-price building contract with a licensed builder, council-approved plans and the builder's insurance details before they approve a construction loan. They value the property on an "as if complete" basis.
Plan for the period while you build: you may be paying rent or another mortgage as well as interest on the amounts drawn. Variations and delays do happen, so a contingency in your budget is sensible.
Documents you may be asked for
- A signed fixed-price building contract
- Council-approved plans and specifications
- Your builder's licence and insurance details
- The contract of sale or title for the land
- Proof of income and savings
General information only. A broker can explain how it applies to your circumstances.
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Construction Loans: common questions
See all questionsHow do progress payments work?
The lender pays your builder at agreed stages, such as the slab, frame, lock-up, fixing and completion. You or the lender normally confirm each stage is finished before payment is released.
Do I make repayments while the house is being built?
Usually you pay interest only on the amount drawn so far, so repayments start small and grow as the build progresses. Once construction is complete, the loan typically moves to normal repayments.
Can I be an owner-builder?
Some lenders will consider owner-builder loans, but fewer offer them and the requirements are stricter. It is worth discussing early, before plans are finalised.
How long does a home loan application take?
Timeframes vary between lenders and depend on how complex your application is and how quickly documents can be provided. We will give you a realistic expectation for your situation and keep you updated at each stage.
How building finance is different
A construction loan works differently from a loan for an established home. Knowing how helps you plan.
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Funds are paid in stages
The loan is usually drawn down as each stage of the build is finished, so the amount you owe grows over the course of the project.
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Repayments change during the build
Many construction loans charge interest only on the amount drawn so far, then change to regular repayments once the build is complete.
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Your contract and plans matter
Lenders normally want a fixed price building contract, council approved plans and details of your builder before they approve the loan.
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Keep a buffer
Variations, site costs and delays are common. Having funds set aside for them reduces pressure part way through.
Ready to talk about construction loans?
Book a time with a MAXLEND broker. There is no obligation.