Construction Finance
What Deposit Is Required For Construction Loans?
5 min read- Finance Guide
- Updated 2026
Quick answer
Typical borrower contribution
5% 20%
cash deposit or usable equity
- Typical LVR range 80-95%
- Cash deposit guide 5-20%
- Land equity Often accepted
1300 421 044
1300 421 044
Detailed explanation
A construction loan deposit is not always just a simple cash percentage. Lenders usually look at the overall structure, including the land value, the build contract, the end valuation, and the maximum amount they are prepared to lend against the completed project. The borrower is then expected to fund the gap through cash deposit, land equity, or other acceptable equity.
How the required deposit is worked out
Lenders usually assess the contribution in a series of steps
- 01Land value
- 02Build cost
- 03Completed value
- 04Maximum LVR
- 05Usable equity
- 06Cash gap
Lenders usually confirm:
The total land plus build exposure- The value of any land already owned
- Whether the completed valuation supports the requested loan
- How much deposit or equity the borrower must contribute
Deposit and loan to value ratio
Typical construction deposit points:
-
Cash deposit is often around 5 percent to 20 percent, depending on lender policy and project strength
-
Owned land or equity in another property can often count toward the required contribution
-
The lender usually assesses the deal against the completed value, not just the build invoice total
-
A stronger valuation can reduce the amount of cash you need to bring in
-
Many lenders want a contingency buffer so the borrower can absorb variations or overruns
Typical contribution range
-
Low cash contribution
5%
-
Typical position
10-15%
-
Strong equity position
20%+
What lenders review when assessing the deposit
Lenders review
Fixed price building contract- Builder credentials and licence
- Council approved plans where required
- Total build cost breakdown
- Land valuation or existing equity position
- Borrower income and servicing
- Timeline, contingency and project risk
Typical deposit outcomes
-
Owned land
May reduce cash deposit
-
Higher LVR request
May mean tighter policy or higher costs
-
Specialised build
Often needs more contribution
-
Strong equity
Can improve approval options
Need Help with your Project?
Common problems
Construction loan deposits can become tricky when the completed valuation is conservative, the borrower has limited equity, or the project carries more risk than standard residential builds.
Not enough usable equity
The land or existing property may have less accessible equity than expected once the lender applies its own valuation and LVR limits.
Possible solutions include:
Contribute more cash- Wait for more equity to build
- Use another acceptable security property
- Reduce the total project cost
Valuation comes in tight
A lower than expected end value can increase the effective LVR and force the borrower to contribute more funds.
Possible solutions include:
- Review the valuation assumptions
- Increase the deposit
- Reduce scope or specifications
- Choose a lender better suited to the project
Insufficient buffer for overruns
Even if the original deposit is acceptable, cost increases during the build can create a shortfall if there is no contingency available.
Possible solutions include:
- Hold a genuine contingency fund
- Reduce non essential variations
- Contribute extra funds if needed
- Refinance after completion if the end value supports it
Steps to get Finance
Step
01
Review land value, savings and available equity
Step
02
Obtain plans, specifications and fixed price build documents
Step
03
Confirm likely completed value and maximum LVR
Step
04
Work out the cash deposit or equity contribution required
Step
05
Submit the full application and satisfy lender conditions
Step
06
Proceed to approval, settlement and staged funding
Speak with a Property Finance Specialist
Construction loan deposits can vary depending on land value, build cost, equity position, valuation outcome, and the lender's maximum loan to value ratio.
A specialist can review the project structure and help determine how much cash deposit or equity may be needed to make the construction loan work.
Speak with a finance specialist about your construction loan deposit
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