Construction loan document checklist

Are you in the process of building a new home or completing major renovations? A construction loan gives you access to money progressively as different stages of the building construction process are completed.

Construction loans function differently from a standard home loan as they typically charge interest-only repayments throughout the building process.

The interest-only period ensures your repayments are kept at a minimum during construction before reverting to a standard mortgage post-completion.

To access funds in your construction loan, you’ll need to submit documents at each stage of the construction process, depending on the type of contract. To help take the guesswork out of what documents you may need to complete your new build, here’s a quick guide to the documents required to enhance with your construction loan.

Standard loan documents

First things first, like any home loan in order to receive a construction loan, there are a number of standard documents that you will be required to provide.

These include:

• Identification documents - Passport, driver's license, state or territory-issued photo ID card (such as Proof of Age card). If you can't provide any forms of primary ID, you can present two forms of secondary ID.
• Proof of income - Two payslips, three months of bank account statements, personal and/or business tax returns, ATO notice of assessment.
• Assets and liabilities - Summaries of existing properties, shares, investments and evidence of sufficient deposit and credit card debt, loan repayments.

Construction loan documents

In addition to your loan application documents, for a construction loan there are other specific documents required, most of which can be obtained from your builder. These are outlined below.

Prior to construction

• Signed building contract: This means the finalised fixed HIA/MBA building contract should be signed and dated by you and the registered Master Builder.
• Contract of sale for land: A contract for the sale of land must be provided or proof that you own the land.
• Quantity Surveyor report: Depending on the cost of the building project, a quantity surveyor report may be required to be included in the contract.
• Council-approved plans: State and local council approval is necessary before construction can commence.
• Evidence of builders insurance: The registered Master Builder must provide evidence of builder insurance, which must detail:
  • The insurance amount equal to or in excess of the building contract
  • Name of the property owner and the building company
  • Address of the construction property
  • Expiry date of the insurance policy
• Quotes for any out-of-contract items: If you need additional work for things like a swimming pool, sheds, etc you will need to provide quotes for the completion of this work to the lender.
• Receipts for out-of-contract items: If you have already purchased items that are not included in your building contract such as kitchen appliances, you will be required to provide receipts.

During construction

• Signed progress payment invoices: Invoices signed to signal the stage of construction.
• Receipts for out-of-contract items: If you have already purchased items that are not included in your building contract such as kitchen appliances, you will be required to provide receipts.

There are typically six stages to the construction loan process, with each requiring signed progress payment invoices before a portion of your loan gets released.

loans.com.au assesses the release of construction loan funds through six building stages:

1. Deposit
2. Slab down
3. Frame up
4. Lock-up
5. Fixing
6. Practical completion

For further information on these stages, see here.

Completion

• Final signed progress payment invoice: The final Invoice signed to signal the completion of the final stage of construction.
• Building insurance policy: This includes a Certificate of Insurance, Certificate of Currency or Home Building Policy Schedule.
• Variations: Any variations to the building contract must be outlined.
• Certificate of Occupancy and Compliance: Issued by the state government or certifying a building's compliance with applicable building codes and other laws.

It’s important to note once the final payment has been made, your construction loan is converted to a standard variable rate loan.

Please note, that this checklist may not cover all individual circumstances and scenarios and serves purely as a guide.

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