Construction home loans for your build, across 52+ lenders

A construction home loan pays your builder in stages as the house goes up, and you pay interest only on what has been drawn. That is the easy part. What decides whether your build is approved, and on what terms, is the building contract, the payment schedule and which lender you put it in front of. We arrange construction loans for house-and-land packages, knockdown-rebuilds, duplexes and owner-builders across Sydney and NSW.

How a construction loan works, in short

The lender values the finished home from the plans and the fixed-price contract, approves a loan against that value, and releases progress payments to your builder at each stage, usually slab, frame, lock-up, fixing and completion. During the build you pay interest on the drawn balance, and once the occupation certificate is issued the loan converts to a standard home loan. The deposit you need and the interest-only period depend on the lender. The full picture, stage by stage, with a worked example of what you pay while building, is in our guide to how construction loans work.

What we do before you sign the building contract

Most construction loan problems are locked in before the application is lodged. This is the work we do up front:

• Payment schedule review. Valuers test the builder’s progress payment schedule against an industry standard, and a front-loaded schedule can fail that test after the contract is signed, which means going back to the builder for an amendment. We read the schedule before you sign. See the fixed-price contract and the cost-to-complete test.
• Lender matching by builder type. A licensed builder on a fixed-price contract, an owner-builder and a cost-plus arrangement each open a different set of lenders and loan-to-value limits. We start with who will lend on your contract, then compare price. See licensed builder or owner-builder.
• Land first, or one loan. Settling the land now and sorting the build later can cost borrowing power, because the rent you are still paying counts against you. Where the builder offers a combined land-and-construction package, we usually structure it as one loan. See house-and-land packages: one loan or two contracts.
• Deposit placement and your own funds. Some lenders release progress payments only after your contribution has gone in first, and charge a fee on each draw. We plan where the deposit sits and what you will fund before the first claim.
• The 5% Deposit Scheme on a new build. Eligible first home buyers can build under the Australian Government 5% Deposit Scheme, but the contract timing, the construction window and the property price caps are strict. We check the rules against your timeline before you rely on it. See using the 5% Deposit Scheme to build.
• Timing and overruns. Construction windows, pre-approval expiry and what happens when the build runs late. See how long a construction loan takes.

How the process runs

1. Conversation and funds to complete. Land price, build contract, your savings, the grant if it applies, and the duty on the land, in one figure.
2. Pre-approval with a lender that suits your builder and contract type, before you sign anything.
3. Contract, plans and specifications go to the lender. The valuer produces an on-completion value and reviews the payment schedule.
4. Formal approval, then settlement of the land or a refinance of your existing land loan into the construction facility.
5. Progress claims. The builder invoices at each stage, you sign the drawdown authority, and we follow the lender so the builder is paid on time.
6. Completion. Occupation certificate, final inspection, the loan converts to principal and interest, and we review whether a refinance makes sense once the property is finished.

What to have ready

Photo identification, two recent payslips and your latest income statement, savings and deposit statements, details of the land or your existing land loan, the builder’s licence and Home Building Compensation cover, the fixed-price contract with plans, specifications and the payment schedule, and the council approval or complying development certificate if it has been issued. Our home loan document checklist covers the rest by employment type.

Talk to us about your build

We have arranged construction finance since 2001, and we have been through the building process ourselves more than once, including a duplex, so the builder, valuer and warranty questions are ones we have lived through. Call (02) 8004 7459 or use the form below. There is no cost to you for our work; we are paid a commission by the lender.

This page contains general information only and does not constitute financial advice. Your personal financial situation, objectives and needs have not been considered. Before acting on any information, you should consider its appropriateness to your circumstances. Speak to a qualified mortgage broker for advice tailored to your situation. Mortgage World Australia Pty Ltd ATF O’Brien Family Trust (ABN 65 653 284 433) is a credit representative (CR No. 396946) of Mortgage Specialists Pty Ltd (ACN 612 422 178, Australian Credit Licence No. 387025).