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.
“Kathy Dundas from Home Loans coordinated the process of arranging the mortgage for our home property purchase for us. Kathy came to our home for an initial meeting. Kathy spent time getting to know us and she was fantastic. She ensured we understood the process & all aspects of applying for a home loan. She gave different options that were available to us, and gave us all the information we needed which allowed us to make a sensible decision about what type of home loan would work for us.”Natalie & Josh - Drummoyne
I have known Kathy since she was highly recommended to me six years ago. As soon as I met her I knew Kathy was a professional of exceptional integrity. Someone I could rely on and trust absolutely. Her warm and relaxed manner immediately gave me confidence that I was in good hands. Since then Kathy has become a valued adviser. She has negotiated several home loans for me. Always smoothly, without delay and for me, totally stress free. I look forward to my continued association with Kathy knowing that I can always rely on her advice and that it will be in my best interests. I would recommend her without exception to anyone who wants a professional of this quality.Jenny Atkins