Build Your Dream Home

Construction Loan vs Standard Home Loan

Land + Build Package

Purchase land and build a new home in one loan. Most popular option for first home builders.

Deposit: Typically 10-20% of total project cost

Knockdown Rebuild

Demolish existing home and build new one on your land. Can use existing home equity.

Deposit: Use existing equity, or 20% of build cost

Owner Builder

Build yourself or manage subcontractors. Higher risk for lenders, stricter criteria.

Deposit: 20-30% typically required

Major Renovation

Significant extensions or renovations. Progress payments as work completes.

Deposit: Use home equity or 10-20% cash

Lender approves you for the full construction amount based on your income, deposit, and proposed build.

Choose builder, finalize plans, sign fixed-price building contract. Lender reviews and approves contract.

First payment released for land purchase or deposit to builder. Construction begins.

Builder requests payment as each stage completes:

• Base stage (slab/foundations) - 15%
• Frame stage - 20%
• Lock-up stage (roof, windows) - 25%
• Fixing stage (plumbing, electrical) - 20%
• Completion - 15%

Lender sends inspector to verify work before releasing each payment.

Construction complete! Final payment released. Loan converts from interest-only to principal + interest standard home loan.

Current Construction Loan Rates

Construction rates are typically 0.2-0.5% higher than standard home loan rates due to higher risk and complexity.

Additional Costs to Budget For

• Progress inspection fees: $250-$500 per inspection (5-6 inspections)
• Building insurance: $800-$2,000 during construction
• Council fees & permits: $5,000-$15,000
• Connection fees: Water, electricity, gas - $2,000-$5,000
• Landscaping & driveways: Often not included in build - $10,000-$30,000
• Rent during construction: 6-12 months if you don't own land

Deposit Requirements

• 10-20% deposit minimum (of total land + build cost)
• Can include land equity if you already own
• Must be genuine savings (3+ months in your account)
• First Home Guarantee accepts 5% deposit for new builds

Builder Requirements

• Must be licensed and registered builder
• Fixed-price contract required (no cost-plus)
• Home warranty insurance (required by law)
• Plans and permits must be council-approved

Borrower Requirements

• Stable employment (6+ months current job)
• Good credit history (650+ credit score)
• Ability to service interest-only payments during build
• Ability to service full P+I payments after completion