Construction Loans

Find out about Construction Loans

Looking into building your own home. You might want to finance your dream home with a Construction Loan. Talk to an Intellichoice mortgage expert to learn more.

Planning to build your dream home from scratch? Get a legit and experienced contractor to do the job. Worried about financing? A Construction Loan might be the best type of home loan for you. Got questions? Talk to our loan specialists today.


Interested in getting a loan? Fast online quotes available here!

Construction or building loans are ideal

Construction loans or building loans are ideal if you are building a new home or planning a major renovation to your existing home. So whether you are based in Sydney, Melbourne, Brisbane, Perth or anywhere else in Australia, we will source the appropriate construction finance or owner builder finance to assist you in realising your dream home.

A construction loan is very specific to those who want to build a new home and sign a building contract with a licenced builder. The lender will determine the total amount you will need in order to pay your builder and then break it down into separate payments, called progress draws. This progress draws are the amounts paid to your builder throughout the construction stages. While these draws are being made, most lenders will only expect you to pay the interest due to them. Your full principal and interest payments won’t start until after the handover and when you receive the keys to your new home.

Getting a construction loan does not only finance the realization of your dream home. With payments released during drawdowns or construction progresses, you are guaranteed that your home is being completed all throughout the disbursement of your loan.

Construction home loan and a standard home loan

The difference between a construction home loan and a standard home loan is that instead of a lump sum payment at agreement sign-off, the loan is usually drawn down in stages for a construction loan. Payments, drawdowns, coincide with the initial purchase of the land, followed by a number of key construction stages. When the construction loan is fully drawn down and the property is complete, it usually reverts to a standard home loan as agreed with the mortgage lender.

Construction loans are ideal for building

Construction loans are ideal for building, as you only pay interest on the amount you draw down. For instance, if you have borrowed $300,000 for a house and land package, but you have only drawn down $150,000 to pay for the land, you only pay interest on the $150,000 and not the full amount.

Payment control

The mortgage lender will use a valuer to assess the land and proposed construction. The mortgage lender also monitors the construction process and only makes progress payments when the builder has reached certain objectives and met satisfactory standards. You will need to provide invoices to the mortgage lender who controls payments to the builder.

The construction stages

1. Foundations/footings
2. Frame and brickwork
3. Lock up
4. Second Fix
5. Practical completion

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Against these stages will be a percentage of the overall payment that will need to be paid at that stage.

For more information about construction loans, please speak to one of the mortgage brokers at Intellichoice about sourcing the most appropriate owner builder finance or construction loan to assist you in the construction of your new home. Call us on 1300 55 10 45.


Our team of experts spends the time to find out about you and your circumstances. We will determine the best options for you based on your earnings, any debts you might still have and your current needs and objectives.

Videos for Construction Loans

You should seek pre approval before entering into a Construction Loans arrangement. The reason is simple, building is a complex excerise requiring good co ordination and technical skills.

Articles for Construction Loans

Lenders are aware of the complexity construction builders face, and the possibility of costs over runs. This comes primarily from in-experience with managing this type of project. Hence most lenders are not generous when it comes to lending at high LVR’s on a Construction Loans.

Frequently asked questions

Why utilize or use a Construction Loans expert?

Working with a construction loan expert means gaining access to numerous resources you wouldn’t get otherwise. They have a massive network of lenders that totally benefit their clients’ loan applications.

How does Construction Loans work?

Construction loans are the type of loans that people get when they are building their own home. Lenders provide the money to finance the construction, which is given in tranches also known as progress draws. It is usually given in five phases that correspond to every major phase of the construction.

How to maximize your chances of being approved?

It is safe to look for pre-approval before entering a Construction Loans arrangement. Pre-approval will give you a thought of what your maximum loan will be, which can enable you to decide whether or not its the correct choice for you.

How much can I borrow?

You can borrow as much as 95% of your house’s to-be-erected (TBE) value plus the total construction cost. The TBE value of your property is assessed using the fair market value based on various indicators.

How to apply for Construction Loans?

You have the option to work with a broker or go directly with a lender of your choice and signify your intention to apply for this loan. You need to provide all the documentation relevant to your project.

You need to have a signed building contract from a licensed builder of your choice before applying for a construction loan. Otherwise, you may consider other loan products such as home loans. If you’re building your own home and you have a valid builder license, then the owner builder loan is probably the best loan product for you.

How Do Banks Fund Construction Loans?

Unlike traditional loan products where the loaned amount is released in full, once the loan application is approved; most lenders release the fund in five tranches, often called progress draws. These stages correspond to the major phases of your home construction.

Why is it so difficult to qualify for a loan?

Unlike in most home loans where the house itself offers security to the mortgage; in construction loans, the house is yet to be erected and in some cases, houses are not at all times built on land areas with high valuation.

How is Construction Loans different to regular Construction Finance?

Construction loans are only available to borrowers, looking at building their houses, who have a valid building contract with a licensed builder. If you are a licensed builder and you want to construct your own house, owner builder loan is the right one for you.

About Us

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