Construction Home Loans
Finance your build or renovation with clarity and confidence
If you’re planning to build a new home or take on major renovations, a construction home loan works differently to a standard mortgage. Instead of receiving the full loan upfront, funds are released in progress payments aligned with key building stages — so you only pay interest on what you’ve drawn, helping to manage cash flow throughout your build.
Because construction loans are more detailed, lenders require documents such as a fixed-price building contract, council-approved plans, and progress payment schedules. Once the build is complete, the loan generally converts into a standard home loan, so it’s important to set it up correctly from the start.
At My Finance Consultants, we compare lenders, prepare your application, coordinate progress payments, and help structure your loan to support both your build phase and long-term finance goals.
How construction loans work
A construction loan usually involves two lending components:
The land loan (if purchasing vacant land)
The construction loan, released in draws as the build progresses
Most lenders require construction to start within 6 months of approval and be completed within 24 months.
During the build, many lenders allow interest-only repayments to help manage cash flow, then convert your loan to principal & interest once construction is complete.
Quick tool: Estimate repayments with our Mortgage Repayment Calculator.
Progress payment stages
Construction loans are paid in stages to your builder as each milestone is completed:
Base Stage
Typically a 15% Progress Payment.
Includes site prep, foundation and slab.
Frame Stage
Typically a 20% Progress Payment.
Includes framing, roofing structure and structural works.
Lock-Up Stage
Typically 20% Progress Payment.
Includes external walls, doors and windows secured.
Fit-Out Stage
Typically 30% Progress Payment.
Includes Internal linings, joinery, electrical and plumbing fit-out.
Completion Stage
Typically a 10% Final Payment.
Includes painting, clean and handover.
Interest is only charged on the amount drawn at each stage, not the full loan from day one.
Documentation lenders require
To approve and fund your construction loan, lenders will request:
Fixed-price building contract
Council-approved plans
Detailed progress payment schedule
Builder’s insurance documents
Updated valuation reports as the build progresses
Any major changes to plans or contract amounts may require lender reassessment, so finalise your documentation before submission.
Additional works to consider
Most fixed-price contracts exclude items such as:
Driveways & landscaping
Fencing & external structures
Pools, sheds or verandahs
These may require separate quotes or additional funds, so we help you plan total project funding from the start.
Common challenges
Builder requires early deposit before lender releases funds
Variations to plans after approval
Timing or weather delays impacting valuation stages
Subcontractor work not included in contract
We guide you on document sequencing, builder drawdown requests, valuation timing, and lender communication — preventing costly delays.
Owner-builder & investment construction
Construction loans are also available for:
Owner-builders (with stricter requirements)
Investors constructing for rental yield or capital growth
We help assess suitability, risks, lender policy differences, and cost/time implications before you commit.
When construction is complete
Your lender will arrange a final inspection to confirm the build aligns with plans and valuation expectations. Once approved, your construction loan converts into a standard home loan.
This is the perfect time to:
Review loan structure
Add offset accounts
Adjust repayment frequency
Consider debt reduction strategies
We manage this transition so your long-term finance strategy is set.
FAQs
Do I need to purchase land first?
Yes — the land is financed first, then construction is approved once your build documents are finalised.
Can I use different lenders for land and construction?
No — both must be with the same lender, unless another property’s equity is used.
Are there extra fees?
Expect additional valuations and progress payment administration fees. We outline all costs upfront.
Can I get a construction loan as an owner-builder?
Yes — but only with select lenders, and additional criteria apply.
What happens after construction is finished?
Your loan switches to a standard home loan. We help ensure it’s structured correctly.