1. Deposit / Land
Funds released to secure land if buying. If you already own the land, this stage is skipped and funds release directly to the builder's deposit invoice.
Construction lending
Staged-drawdown finance for building or renovating
A construction loan funds the build of a new home, a major renovation, a knock-down rebuild or a custom build — releasing money to the builder in stages as the work progresses. You only pay interest on what's been drawn, not the full loan amount, which keeps holding costs lower during the build.
The structure matters. Each lender has its own progress claim approval process, valuation requirements at each stage, contingency policy, owner-builder rules and end-of-construction conversion to standard home loan terms. Getting the lender right at the start avoids drama at slab, frame and lock-up stages.
We've structured construction loans for first home builders, established owner-occupiers doing major renovations, custom builds with architects, and complex knock-down rebuild projects. Each profile suits different lenders.
How it works
The standard construction loan drawdown schedule
2. Slab
Site cut, footings, slab poured. Lender requires builder's progress claim and lender-instructed valuer inspection before releasing this drawdown.
3. Frame
Structural frame complete. Walls, roof trusses, floor structure in place. Second valuer inspection required.
4. Lock-up
Roof, external walls, doors and windows installed — building is weatherproof and secure. Third drawdown.
5. Fixing
Plaster, kitchen, bathroom rough-in, internal fit-out, cabinetry. Fourth drawdown.
6. Completion / handover
Final touches, paint, fixtures, certificate of occupancy. Final drawdown plus retention release.
Common build profiles
What kind of build are you doing?
House & land package
Standard volume-builder home on land you've contracted to buy. Most lenders straightforward — clean approvals, predictable valuation, standard drawdown schedule.
Knock-down rebuild (KDR)
Demolish existing home, build new. Lender treats existing dwelling value as zero for valuation. Interest-only during build phase. Common in established Melbourne suburbs.
Custom architectural build
Architect-designed custom home, often with non-standard finishes. Higher build cost, valuation can lag actual build cost, requires careful lender selection.
Major renovation / extension
Construction loan secured against existing dwelling. Typically released alongside the existing home loan or as a refinance + construction structure.
Owner-builder
You're acting as builder yourself. Significantly tighter lender criteria — only some lenders will lend to owner-builders, requires owner-builder license and detailed cost breakdown.
Dual-occupancy / granny flat
Adding a second dwelling to your block. Treated as a construction project but with valuation upside (two dwellings) on completion.
Client stories
Real outcomes for real clients
★★★★★
"The team made what felt like a daunting process completely manageable. We secured a rate the bank wouldn't touch directly and were in our first home eight weeks later."
★★★★★
"After years of being told no by the majors for our self-employed structure, MortgageHQ found a solution. Approval came within a fortnight and on competitive terms."
★★★★★
"We refinanced our commercial property and unlocked equity for a second purchase — they structured the whole deal across two lenders. Saved us hundreds of basis points."
Answers
Construction loans — frequently asked questions
How is interest calculated on a construction loan?
Interest is charged only on the amount that's been drawn so far — not on the full approved limit. So at slab stage you might be paying interest on $250k of a $600k facility; by lock-up that might be $400k; full balance by handover. This keeps holding costs lower during the build.
Do I make principal repayments during construction?
No — almost all construction loans operate interest-only during the build phase. Once the build is complete and the loan converts to a standard home loan, principal and interest repayments typically commence.
How long does the construction phase last?
Most volume builds run 6–9 months from slab to handover. Custom architectural builds can run 12–18 months. Lenders typically allow up to 12–18 months for the construction phase before the loan must convert to standard terms or refinance.
Can I borrow 95% of the build cost?
Most lenders cap construction LVR at 90% for first home builders, 80% for upgraders. Above 80% LMI applies. The valuation done at the start (land + build contract value) determines maximum lending; if the as-complete valuation comes in lower than expected, you may need to contribute additional deposit.
What happens if the build runs over budget?
Lenders set a contingency at the start (typically 5%) for minor cost overruns. Significant overruns require additional deposit funds from you, a top-up of the loan (subject to fresh approval), or a variation submitted through the lender's progress claim process.
Can I get a construction loan as an owner-builder?
Yes, but it's more restrictive. Most major lenders don't lend to owner-builders at all. Specialist lenders do, with tighter LVR (often 70% max), proof of owner-builder license, detailed cost breakdown verified by an external quantity surveyor, and tighter draw conditions. We know which lenders will work with owner-builders.
Get in touch
Let's start the conversation
No obligation. Completely confidential. We'll respond within one business day to set up a no-pressure initial chat about your goals and the lending options available to you.
- Free initial consultation — no fees to talk
- Access to 60+ lender panel including major banks
- 25+ years of broker experience on every file
- We work with your accountant and advisers
Get in touch
Book a free consultation
Tell us a little about your situation and we'll be in touch within one business day. No obligation, completely confidential.
Ready for a smarter finance conversation?
Tell us about your situation — first home, refinance, commercial, SMSF or anything in between. We'll find the right structure across 60+ lenders. No obligation, completely confidential.