Construction Loan

A construction home loan is designed for someone who is building or renovating a home. It offers cashflow flexibility since funds are released progressively in stages throughout the construction process. At loans.com.au, our construction home loan repayments are based on the amount used and it is interest only during the construction period.

Yes, construction loans can be used for major renovations or extensions. If your renovation involves structural changes, such as extending your home, reconfiguring layouts, or carrying out significant upgrades, a construction loan may be suitable.

Once the renovation is complete, the loan typically converts to a standard home loan.

loans.com.au does not offering financing for purchasing only land - we finance the construction of your home only, or a land and construction of your house under one loan.

Both options can fund the construction of your new home. The difference is mainly in the structure of the relationship and the product you end up with long term.

When you finance through a builder's preferred lender, the loan is arranged as part of the overall package with your builder. This can feel more streamlined at the sales stage, as the builder and lender are working together. It's worth checking what the home loan product looks like after construction is complete - including the ongoing rate, fees, and features such as offset accounts.

When you finance through loans.com.au, you're working with an independent lender that is independent to your builder or developer. Your loan is assessed and managed separately from your build contract. Progress payments are released to your builder at each stage following independent verification that the work has been completed. Once construction is finished, your loan automatically converts to our standard variable home loan.

In both cases, it's worth comparing the full terms, not just the construction rate, but the ongoing rate, fees, and loan features. If you'd like to see how a loans.com.au construction loan compares, book a call with our lending specialists today.

To apply for a construction home loan, you will need to provide your income, expenses and personal identification documents, plus the documents relating to your built: 

• Council approved building plans  

• A fixed price building contract from a licensed builder from the Housing Industry of Australia (HIA) or the Master Builders of Australia (MBA) detailing the building stages and schedule of payments 

Interest is only charged on the amount that has actually been drawn down. For example, if your full loan amount is $600,000, but only $60,000 has been drawn at the deposit stage to pay your builder, this means you pay interest on the $60,000. Repayments increase gradually as each stage of construction is completed and more funds are released to your builder. You only pay interest on the full balance when the final draw-down takes place at the final stage of construction which is the practical completion.

Before construction begins, your builder will prepare a contract outlining each construction stage and associated costs. We then progressively drawdown your loan to pay the builders' costs at each stage. Your construction loan will be interest-only repayments while your home is being built.

Once construction is complete and the final inspection is approved, the loan typically converts to a standard home loan with principal and interest repayments. If you were approved for a longer interest-only term at the time of your application, you can opt to remain on interest-only payments for the remaining of the approved interest-only term.

The 6 construction stages are: 

1. Deposit 

2. Slab down 

3. Frame up complete 

4. Lock-up 

5. Fixing 

6. Practical completion 

A progress inspection will be carried out by an independent valuer for each building stage. Once your builder sends the invoice to us, a progress inspection will be ordered.