Construction & building loans
A construction loan pays for your home in stages, not all at once.
You draw the money as the build hits each stage, and pay interest only on what's been used so far. That's more moving parts than a normal purchase, so we match you to the right lender and manage every drawdown, from slab to handover.
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Not a normal home loan
The loan is the part of building that surprises people most.
With a normal purchase the lender hands over one lump sum and you're done. A build is different: the money comes out in stages as the work gets done, the lender values the home as if it's already finished, and you'll often carry rent or your current mortgage at the same time as the loan interest. None of it is hard once you can see the shape of it.
What a lot of first-time builders expect
- You get the full loan at settlement
- You repay the whole loan from day one
- Any builder and a rough quote will do
- The bank values the block you’re buying
- It works like a standard home loan
How a construction loan actually works
- Money is released in stages as each part is built
- You pay interest only on what’s been drawn so far
- You need a licensed builder and a fixed-price contract
- The lender values the home as if it’s already finished
- Interest-only through the build, then it reverts to principal and interest
Progress payments
How the money reaches your builder, stage by stage.
A construction loan is drawn down in progress payments. As each stage is finished the lender checks the work or sends a valuer, then releases that slice of the money straight to your builder. You're only ever paying interest on what's been drawn, so your repayments start small and climb as the house goes up.
Deposit
Your deposit or first draw gets the build underway once the contract is signed and the plans are approved.
Base or slab
The site is levelled and the footings and concrete slab go down. The first big progress payment is released after this stage is checked.
Frame
The frame goes up, along with roof trusses and a partial roof. The home finally has a shape you can walk through.
Lock-up
External walls, windows and doors go in so the house can be locked. This is the point it’s weathertight.
Fixing or fit-out
Inside gets fitted out: plaster, cabinetry, tiling, plumbing and electrical. The biggest draw, because most of the finishing happens here.
Completion
Final touches, a clean, and handover once it passes inspection. The loan then reverts to principal and interest like a standard home loan.
You only pay interest on the money that’s been drawn, not the full loan. Early on that’s a small amount, and it grows as each stage is funded.
Most lenders let you make interest-only repayments through the build, which keeps things manageable while you may still be paying rent or your current mortgage. Once the home is finished, the loan reverts to principal and interest.
Typical stage percentages follow a standard building schedule and vary by contract, builder and lender.
Which build are you financing?
New build, knockdown-rebuild, house and land, or owner-builder.
A construction loan covers a few different situations, and the right lender and structure change with each one. Here's where you fit.
Building on your block
You own the land, or you’re buying it, and building with a licensed builder on a fixed-price contract. The most common construction loan, and the one most lenders are set up for.
A house and land package
Land and build are often financed together, sometimes as two settlements: one for the land, then the construction loan for the build. We line up the timing so nothing stalls.
Replacing the home you own
Because you already own the land, your existing equity usually does the work of a deposit. The lender values the finished home, so a stronger end value can lift how much you can borrow.
Managing the build yourself
This is the hard one. Only a small group of lenders will fund owner-builders, deposits are much larger, and you’ll need more paperwork to prove the numbers. Possible, but worth a straight conversation before you count on it.
A few builds have their own path. Building your first home can tap the low-deposit schemes, so it's worth reading the first-home buyers and low-deposit guides too. Many owner-builders are self-employed, and building an investment property is assessed on its end value and rent.
Where we come in
A bank hands you a construction loan. We manage the whole build.
Construction lending is where lender policies split the most: which builders they'll accept, how they value the finished home, how fast they release each drawdown. We weigh all of it across 30+ lenders, match you to one that suits your build, then handle the progress claims and valuations so your builder gets paid on time and the project keeps moving.
What clients say
In the homes they built.
Knocked back by the bank on a construction loan
"…we were knocked back by our bank when it came to getting a construction loan… we were virtually told that what we wanted to do was impossible (unless we came up with a much higher deposit)… my broker not only found us a loan, but at a much lower rate… We are now living in our beautiful home."
Built in Perth on a 5% deposit
"…after a year of being here decided we wanted to build a house in Perth… My broker immediately explained to us that we could get a loan with only 5% deposit… Within a few days we had all the information we required… he had our full approval within weeks."
Real customer reviews from MAP Home Loans, the mortgage brokerage behind Approov.
Good to know
Costs vary
Stage percentages aren’t fixed
The stage splits above follow a common building schedule, but your builder’s contract sets the real numbers. We read the contract with you so there are no surprises at draw time.
Honest about the hard ones
Owner-builder is a different animal
Fewer lenders, bigger deposits, more to prove. We’ll tell you honestly whether it stacks up for your situation before you commit to the path.
In your corner
Free to you, and on your side
We’re paid by lenders for introducing loans. Under the Best Interests Duty we’re legally bound to recommend what’s right for you, not what pays us most.
Common questions
Construction loans, answered.
- How much deposit do you need for a construction loan in Australia?
- Often somewhere between 5% and 20% of the land plus build cost, and the exact figure depends on the lender and your situation. Under 20% usually means Lenders Mortgage Insurance, while a knockdown-rebuild can lean on the equity in the land you already own. We’ll work it out on your real numbers.
- How do construction loan progress payments work?
- The loan is released in stages that follow the build: a draw at slab, at frame, at lock-up, at fit-out, and at completion. Before most draws the lender checks the work or sends a valuer, then pays that slice straight to your builder. You only pay interest on what’s been drawn.
- Do you pay interest during construction?
- Yes, but only on the money that’s actually been drawn down, not the whole loan. Most lenders let you make interest-only repayments through the build, which keeps costs down while you may still be paying rent. Once the home is finished, the loan usually reverts to principal and interest.
- Can we get a home loan to build a house?
- Yes. Building a home uses a construction loan rather than a standard home loan, because the money is released in stages as the work is done. You’ll generally need a licensed builder and a fixed-price contract, and the lender values the home as if it’s already finished.
- What’s the difference between a construction loan and a normal home loan?
- A normal home loan pays one lump sum for a home that already exists. A construction loan pays your builder in stages as your home is built, charges interest only on what’s drawn, and is assessed on the finished value. When the build is done, it settles into an ordinary home loan.
- Can I get a construction loan as an owner-builder?
- Sometimes, but it’s the hardest version to finance. Only a small group of lenders will fund owner-builders, the deposit required is usually much larger, and you’ll need extra documents like a costed schedule and council-approved plans. It’s worth a straight conversation before you count on it.
- Can I afford to build while I’m paying rent?
- That overlap is the part people worry about most. Because you pay interest only on what’s drawn, the loan repayments start small and build gradually, which softens the double-up with rent or an existing mortgage. We map the cash flow stage by stage before you commit.
Book a Free Strategy Session before you sign the build contract.
A licensed broker walks you through the lenders that suit your build and how the progress payments work. Nothing to prepare, no obligation.
15 to 30 minutes · no obligation · 30+ lenders