Construction Finance
Construction Loan Fees And Costs
5 min read- Finance Guide
- Updated 2026
Quick answer
Costs come from more than the interest rate
4+
major cost layers usually need to be budgeted for
- Lender fees Can vary by bank
- Valuation and inspections Often separate third party costs
- Legal and government charges May apply outside the loan
- Interest during build Charged on funds drawn
1300 421 044
1300 421 044
Detailed explanation
Construction finance costs are usually a combination of lender pricing and project related expenses. Some are one off costs paid before or at settlement, some arise during the build as draws are requested, and some continue over time in the form of interest. This is why a proper construction budget needs to consider the entire funding process rather than focusing on a headline rate alone.
Main fee categories
Construction loan costs often sit across these areas
- 01Lender fees and account charges
- 02Valuation and progress inspection costs
- 03Legal, settlement and government charges
- 04Insurance and compliance costs
- 05Interest charged during construction
- 06Variation or overrun related costs
When budgeting, borrowers usually need to allow for:
costs charged by the lender or capitalised to the loan- third party costs charged by valuers, surveyors or legal providers
- interest that rises as more funds are drawn during the build
- unexpected costs if the project varies, delays or needs extra reporting
What often appears in the cost stack
Common cost items can include:
-
establishment, application, package or ongoing account fees depending on lender pricing
-
initial valuation and later progress inspection or final inspection costs where applicable
-
legal fees, settlement costs, registration or government charges that may sit outside the bank fee schedule
-
building insurance, lender required certificates and any extra reports such as quantity surveyor input where required
-
interest during construction, which is usually charged only on the amount already drawn rather than the full approved facility
Cost layers
-
Lender fees
Policy based
-
Inspection and valuation costs
Often recurring through the build
-
Interest and project extras
Can be the largest total cost over time
Where costs commonly arise
Potential lender and third party charges
application, package or account fees depending on product structure- valuation fees before approval where required
- progress inspection fees or valuer site visit costs
- progressive drawing fees with some lenders
- final inspection or completion related reporting costs
- legal, settlement, discharge or registration costs if relevant
- insurance and project compliance costs outside the lender
How the cost pattern usually works
-
Upfront costs
Valuation, legal preparation, insurance and some setup charges
-
During construction
Progress draw related costs and rising interest as funds are used
-
At completion
Final inspection and any conversion to the end loan structure
-
Extra costs can arise from
variations, delays, cost overruns or extra reporting requirements
Need Help with your Project?
Common problems
Construction loan costs often blow out when borrowers budget only for interest and miss the wider project related expenses around the finance process.
Inspection and report costs were not allowed for
Borrowers sometimes budget for the build contract only and overlook valuation, progress inspection or quantity surveyor related expenses.
Possible solutions include:
ask early which inspections the lender expects through the build- allow a separate line item for valuation and reporting costs
- check whether fees are charged by the lender or passed through from third parties
- include a contingency for extra reports on more complex builds
Interest cost was underestimated
Interest is usually lower early in the build because only part of the loan is drawn, but the cost rises as more funds are used and the build runs longer.
Possible solutions include:
- model the likely draw schedule rather than assuming one flat repayment
- allow for the project taking longer than expected
- check whether interest during construction is capitalised or paid from cash flow
- include a buffer for rate movement and delays
Variations and overruns create extra finance cost
When the contract changes or the project runs over budget, additional valuation, legal, drawdown or refinance costs may arise on top of the actual building variation.
Possible solutions include:
- keep variations to a minimum once finance is approved
- maintain a contingency fund outside the contract sum
- tell the lender early if the budget or timeline changes
- review whether the current lender still fits if the project changes materially
Steps to get Finance
Step
01
Map the full build budget including finance related expenses
Step
02
Confirm likely lender fees, product pricing and drawdown rules
Step
03
Allow for valuation, legal, inspection and insurance costs
Step
04
Model interest during construction based on likely draw timing
Step
05
Keep a contingency for variations, delays and extra reports
Step
06
Review actual costs through the build instead of waiting until completion
Speak with a Property Finance Specialist
Construction loan pricing can vary significantly depending on the lender, the project type, the need for extra inspections and how the facility is structured.
A specialist can help break down the likely fee stack early so the finance budget is realistic before the build begins.
Speak with a finance specialist about your construction loan costs
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