A full guide to understanding Australian construction loans
Ready to build your dream home or undertake a significant renovation? Construction loans provide the flexible financing you need to bring your building project to life. Whether you're building from the ground up or making extensive renovations, our expert mortgage brokers help you secure the right construction loan with competitive rates across 35+ lenders.
Construction loans work differently from traditional mortgages. You receive funds in stages as your project progresses, so you only pay interest on the money you've drawn, saving you thousands during the building phase. Let us help you navigate the process and secure the best terms for your construction project.
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Free Construction Loan AssessmentWhy choose Buyvest mortgage brokers over banks for your construction loan
35+ lenders to compare
Banks represent only themselves. We represent you, comparing rates and terms across all major lenders.
No cost to you
Lenders pay our commission directly. You pay the same rate whether you go to the bank directly or through us—but with expert guidance included.
Time & money savings
We navigate complex paperwork, coordinate valuations, and manage lender communications. We often save clients thousands in rates and fees.
Specialised strategies
We structure your construction loan to match your project needs. Whether it's staged payments, timing, or builder requirements, we find solutions tailored to your build.
Builder relationships
We have established relationships with major builders and lenders, accelerating approvals and ensuring smooth progress payments throughout your project.
Ongoing support
We don't disappear after settlement. We're available for refinancing, rate reviews, and assistance as your project progresses to completion.
How can Buyvest mortgage brokers help you with your construction loan?
Pay interest only on drawn funds
You only pay interest on the amount you've drawn down, not the full loan amount. This saves you thousands during the construction phase.
Flexible stage payments
Progress payments align with your building schedule and key milestones. Foundation, framing, roofing, and interior work stages are all covered.
Interest-only during construction
Some lenders allow you to pay interest only during the construction phase, making payments easier until the house is completed and occupied.
Tailored to your project
Construction loans are designed for specific building needs. We match you with lenders who understand your project type and timeline.
Competitive rates
We access rates tailored for construction borrowers. We compare multiple lenders to secure the lowest available rates for your project.
Seamless transition
When construction is complete, we help transition your construction loan to a standard mortgage, often without requiring a new application process.
What is a construction loan?
A construction loan is a short-term loan that provides you with money to build a new house or make substantial renovations to one you already own. Unlike traditional mortgages where you receive the full amount upfront, construction loans disburse funds in stages as the building project progresses. This means you only have to pay interest on the money you've already spent, which can save you a significant amount while you're developing.
Building a new home
Construction loans are perfect for building a new house from the ground up. You can access funds at each building stage: foundation, framing, roofing, interior work, and final completion.
Major renovations
Undertaking substantial renovations or home extensions? Construction loans can fund significant makeovers to your existing property, improving value and functionality.
Key considerations for construction loans
Loan-to-value ratio (LVR)
What it means: How much the loan is worth compared to the property's value.
Impact: A lower LVR gets you better borrowing rates. Banks usually require foundation and framing payments to be less than half the total loan amount.
Builder selection
What matters: Ensure your builder is licensed and has experience with similar projects.
Why it helps: Experienced builders speed up the financing approval process and ensure quality outcomes.
Progress payment milestones
What to know: Know when and how to request payments based on key building stages.
Why it matters: Clear milestones prevent disputes and ensure smooth fund disbursement throughout your project.
Fees and charges
What to ask: Inquire about establishment fees, valuation costs, and progress payment fees.
Why it's important: Understanding all costs upfront helps you budget accurately for your project.
Benefits of getting a construction loan
You only pay interest on the amount you use
You pay interest only on the amount you've drawn down, which decreases your initial costs because the loan is paid out in parts rather than as a lump sum.
Construction loans are tailored for specific needs
Construction loans are designed to meet the specific needs of building projects. You can pay when your construction schedule says you should, giving you complete flexibility.
Interest-only payments during construction phase
Some lenders allow you to pay interest only during the construction phase, which makes it easier to manage cash flow before the house is completed and occupied.
Staged disbursement protects your investment
Lenders only disburse funds when construction milestones are met, protecting both you and the lender by ensuring the project stays on track and on budget.
Understanding construction loan interest rates
Interest rates on construction loans in Australia vary based on several factors, such as the lender, the size of the loan, and the type of project. Because construction loans are considered short-term with higher risk, the interest rates are usually higher than those of conventional home loans. However, since you only pay interest on drawn funds, your overall costs can be competitive.
Factors affecting rates
Lender choice: Different lenders offer different rates.
Loan size: Larger loans may qualify for better rates.
Project type: Building new vs major renovations may have different rates.
LVR: Lower LVR typically means better rates.
Rate comparison tips
Compare multiple lenders: Get quotes from several banks and lenders.
Use a calculator: Find out how much you'll pay each month and total interest over the loan term.
Ask about rates: Check if rates are fixed or variable during construction phase.
Construction loan vs standard home loan: which is right for you?
Construction loan
Best for: Building new homes or major renovations.
Fund disbursement: Staged payments based on construction milestones.
Interest: Pay only on funds drawn during construction phase.
Duration: Short-term, typically 12-24 months until completion.
Flexibility: Payments align with your building timeline.
Standard home loan
Best for: Purchasing an existing property.
Fund disbursement: Full amount paid upfront at settlement.
Interest: Pay on the full amount from day one.
Duration: Long-term, typically 20-30 years.
Simplicity: One-time settlement and standard monthly payments.
Construction loan calculators
Use our free mortgage tools to plan your construction project budget and understand your borrowing capacity
How construction loans work: step-by-step process
Submit your application with builder quotes, project plans, and construction timeline. Lenders assess the project and approve your construction loan.
Money is disbursed in stages as building milestones are completed—foundation, framing, roofing, and interior work trigger each payment.
Pay interest only on drawn funds during construction. Some lenders allow interest-only payments, reducing your monthly outgoings.
When construction is complete, your loan converts to a standard mortgage. We help arrange the transition seamlessly.
How to apply for home loans with Buyvest mortgage brokers
Applying for home loans is simple when you work with a best mortgage broker. Here's how to get a mortgage loan and find the best home loan rates for your situation.
Discuss your home loan goals and financial plans with Buyvest. Let us help you prepare for applying for home loans, including paperwork organisation and pre-approval. When applying for mortgage, doctors benefit from our expert guidance on types of home loans and best home loan options.
We review your finances and compare home loans across 35+ best home loan lenders and best mortgage banks. Buyvest explains your choices so you make the right call. Applying for a house loan becomes easy when comparing low-rate home loans and best home loans available.
We handle settlement, coordinate with solicitors, arrange property valuations, and provide ongoing support. After applying for mortgage, Buyvest specialist team ensures smooth completion. Get a mortgage loan approved and receive continued support throughout the entire home loan process.
Documents needed for a construction loan application
Have these ready to streamline your approval process and get pre-approved faster for your construction project.
Personal Identification
Australian passport or driver's license (with photo, full name, DOB, current address), plus citizenship certificate or birth certificate.
Proof of Income
Two recent payslips from current employer, or 2 years' tax returns if self-employed. For contract/casual work, employment letters plus most recent Pay As You Go (PAYG) summary.
Financial Statements
Latest bank statements (3 months), savings account statements, and internet banking history showing your current financial position.
Builder Quote & Plans
Detailed builder quote breaking down costs for each construction stage. Include architectural plans, construction timeline, and specifications.
Existing Debt Information
Statements for all existing home loans, car loans, credit cards, and personal loans. We calculate your full debt servicing capacity.
ABN & Business Documents (Self-Employed)
ABN details, 2 year's company tax returns & profit & loss statement, personal tax return, personal notice of assessment & Business Activity Statements.
Building your dream home starts with the right financing
A construction loan is a tailored approach to receive the money you need to build or renovate a home in Australia. With a construction loan, you can pay for your project over time and with flexible terms, so you don't have to pay interest on the whole amount immediately. You will feel more confident about your building project if you understand how these loans work, what they can do for you, and what you need to do to receive one.
If you need money for your building project, consider inquiring about a construction loan right away. Contact our experts to compare rates across 35+ lenders, and use our construction loan calculator to find out how much you can afford to repay. The first step in creating your dream home is securing the right financing. We're here to help you every step of the way.
Frequently asked questions about construction loans
What does it mean to get a construction loan?
A construction loan is a short-term loan that helps you pay for building or renovating a house. Money is disbursed in phases as the building progresses, allowing you to pay interest only on the funds you've drawn.
How do I acquire a loan to build something in Australia?
To get a construction loan, you must provide proof of your identity, income, a builder's quote, and detailed plans for the construction. Our brokers help you gather and submit all necessary documentation to streamline the approval process.
How much do construction loans cost in interest?
Typically, the interest rates on construction loans are higher than those on conventional home loans. However, this may vary depending on the lender and your financial situation. We compare 35+ lenders to find you the best available rates.
Can I use a construction loan to make repairs to my house?
You can use a construction loan to make substantial improvements to your home, including building, remodeling, or major renovations, as long as they improve the property. Minor repairs typically aren't covered.
What do progress payments indicate for a construction loan?
Progress payments are made when specific milestones are achieved, such as completing the foundation, framing, roofing, or interior work. Payments are disbursed as the work progresses according to your construction contract.
Mortgage brokers for construction loans across Sydney and Australia
Our expert mortgage brokers help homeowners access construction loans across Sydney and Australia. Whether you're building your dream home or undertaking major renovations, our team of experienced construction loan specialists are here to guide you through every stage of your project.
Ryde area suburbs
Greater Sydney regions
Regional NSW
Australia wide
Ready to build your dream home? Contact us to explore construction loan solutions nationwide and how we can help you finance your building project.
Let's build your dream home together
Get expert advice on construction loans tailored to your project. Our mortgage brokers have helped hundreds of Australians finance their dream builds with competitive rates and flexible terms.
Free Construction Loan AssessmentImportant stuff:
Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
Any advice and information is provided by Buyvest Pty Ltd ABN 91 684 841 496, Australia Credit Licence No. 567392 and is general in nature, for educational purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without considering your objectives, financial situation or needs. Therefore, consider the appropriateness of the advice for your situation and needs before taking any action. It should not be relied upon to enter into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy. If any financial product has been mentioned, you should obtain and read a copy of the relevant Product Disclosure Statement and consider the information contained within that Statement concerning your circumstances before deciding whether to acquire the product. You can obtain a copy of the PDS by emailing hello@buyvest.com.au. If you want to change your financial circumstances, such as applying for a loan, all loan applications are subject to credit approval.
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