Construction Finance
Construction Loans Explained
5 min read- Finance Guide
- Updated 2026
Quick answer
Staged release — not a lump sum
6 Draw stages
Interest only on the drawn balance during build
- During construction Interest only
- After completion Converts to P&I
- Secured against Land + property
- Unused funds Not charged interest
1300 421 044
1300 421 044
Detailed explanation
Construction loans differ from standard property loans because funds are not advanced in full. Instead, the lender controls the release of funds to manage risk while the property is being built.
How construction loans are structured
Construction loans typically include:
land purchase or existing land value- build contract amount
- contingency allowance
- interest during construction
- staged progress payments
The lender approves a total facility, but only releases funds when required.
Progress draw stages
Most construction loans follow standard stages:
- 01 Deposit
- →
- 02 Slab or base
- →
- 03 Frame
- →
- 04 Lock up
- →
- 05 Fixing
- →
- 06 Completion
At each stage:
Builder submits invoice- lender confirms stage completed
- funds paid to builder
- interest calculated on drawn balance only
Interest and repayments
During construction
interest only repayments common- interest charged only on funds used
- repayments increase gradually
- unused funds not charged interest
After completion
-
loan converts to principal and interest
-
full repayment schedule begins
-
borrower may refinance if required
Need Help with your Project?
Common problems
Construction loans involve valuation, builder and timing risks that can affect approval.
End value not sufficient
If the completed value is too low, the lender may reduce loan size.
Possible solutions include:
- increase deposit
- reduce project cost
- stage construction differently
- use equity from another property
Construction delays
Build time extending beyond approval period can create issues.
Possible solutions include:
- request approval extension
- update valuation if required
- restructure repayment terms
- refinance if needed
Documentation incomplete
Missing plans or contract details can delay approval.
Possible solutions include:
- provide fixed price contract
- supply council approved plans
- confirm builder licence
- provide detailed cost breakdown
Steps to get Finance
Step
01
Confirm land purchase or land ownership
Step
02
Obtain fixed price build contract
Step
03
Submit full application with plans and costs
Step
04
Lender assesses completed value and servicing
Step
05
Construction begins and progress draws occur
Step
06
Loan converts after completion
Speak With A Construction Loan Specialist
Property development finance can vary significantly depending on the project size, location, approvals, and the developer's experience.
A specialist can review your project and help determine which lenders may be able to fund it.
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