Building your dream home

For many people, the quest for their perfect home is not limited to pre-built dwellings in existing locations. You may have seen a great house in the wrong location, or an empty block of land in the most ideal setting. Or maybe a house that would be perfect…if only it had three more rooms!  Why not design and build your ideal home and watch your dreams come to life?

The chance to create your dream home designed from the ground up just to meet your exact requirements can be an immensely rewarding and thrilling experience. A construction loan is the best way to fund construction of a new home, or a major building renovation.

Since the process of building a home is significantly different to buying an existing home, the loan process is different and quite specialized.

How a construction loan works

Instead of being paid for in one lump sum, construction or major renovation projects are customarily paid off in stages as the project progresses past certain milestones.

A construction loan will require a construction contract that details the exact cost of the project, broken down into the amounts the builder requires as each defined stage of the construction is completed. Often the bank or lender will inspect the building work at each completed stage before authorising the progressive payment.

Contracts and projects will vary, but typically there might be four or five defined stages requiring a progress payment of a certain percentage; for example:

• Base or foundation slab – 20% of the total construction cost
• Frame up 15%
• Outer walls 15%
• Lock up 25%
• Practical completion 25%

Interest on a construction loan

Interest payable throughout the construction process is minimized as it is only calculated and payable monthly on the amount of money that has already been paid to the builder or ‘drawn down’. Your repayments will increase as payment for each stage of construction is made. Furthermore the loan is normally structured as ‘interest only’ up until completion, thus minimizing repayments to maximize your cash flow during construction. Usually upon building completion and the full amount being drawn down the loan reverts to a ‘principal and interest’ loan to start paying off the principal.

How do I get a construction loan?

You will need:

• Plans and specifications approved by council
• A fixed price building contract by a registered or licensed builder
• Construction insurance

What’s the best construction loan?

At  we determine your unique needs, and find the most suitable construction loan from a range of lenders, to ensure it fits your circumstances and requirements. Our service is free.