Construction Loans
Fund your build in staged drawdowns, manage cash flow during construction, and transition to principal & interest once finished.
How construction loan drawdowns work
With a construction loan, the lender releases funds in stages and only when required. Typically there are five progress payments. Each time the builder reaches a stage, they issue an invoice for you to forward to your broker or the bank. The bank then pays that invoice and the loan is drawn down for that stage. Your building contract will outline the stages and timing.
Repayments during and after the build
Most construction loans are interest-only during the build to keep repayments lower while you are paying rent or current mortgage costs. Once construction is complete and the lender receives final documents (e.g., occupancy certificate), the loan typically converts to principal & interest repayments.
Typical progress payment stages
Exact stages and percentages vary by builder, contract, and lender.
Contracts, valuations, and approvals
- Always sign “subject to finance”. Just like buying an established property, protect yourself in case valuation or policy outcomes change.
- Provide the full build pack early. Building contract, detailed specifications/quote, and council-approved plans enable a construction valuation.
- Be valuation-aware. Over-capitalising on fixtures and fittings can push the contract price above comparable sales. If the valuation comes in short, the lender will only lend to the allowable LVR, and any shortfall must be covered by you.
Practical tips and pitfalls to avoid
- Keep a contingency buffer. Variations and delays are common; allow headroom in both budget and timeline.
- Submit invoices promptly. Avoid build delays by forwarding progress claims quickly for assessment and payment.
- Understand rate type. Clarify if your interest rate is variable or fixed during construction and ask about any construction loading.
- Insurance & permits. Ensure builder’s insurance, permits, and progress inspections are in place per your contract and lender policy.
Opinion: a conservative spec list and a proper contingency fund protect you from valuation gaps and top-ups mid-build.
Planning a build or major renovation?
I will structure the loan, coordinate valuations, and guide your progress payments—so the build stays funded and on track.