Construction Finance
Can You Use Equity For Construction Finance?
5 min read- Finance Guide
- Updated 2026
Quick answer
Usable equity may replace cash deposit
80% 90%
common maximum LVR range before existing debt is deducted
- Usable equity Value x LVR less debt
- Security options Existing home, land or both
- Cash contribution May be reduced or avoided
1300 421 044
1300 421 044
Detailed explanation
Equity based construction finance works by using the value already built up in another property, or in the land you already own, as part of the overall security position. Rather than relying only on cash savings, the lender measures available equity, assesses the proposed end value of the completed project, and then structures the loan around serviceability, policy and risk.
How equity is commonly used
Common ways equity can support a construction loan
- 01Land already owned
- 02Existing home equity
- 03Investment property equity
- 04Refinance or top up
- 05Cross collateral structure
- 06Single security after completion
In a typical equity scenario:
Lender orders valuation on the equity property- Existing debt secured against it is deducted
- Available equity is counted toward the contribution
- Construction funds are still released by build stage
How usable equity is calculated
Typical equity based construction finance points:
-
Usable equity is often estimated from the property value multiplied by the lender LVR, less the existing loan balance
-
Land already owned can often act as equity if title is in place and the valuation supports it
-
Equity may reduce the cash deposit needed for the build
-
Some lenders accept separate securities while others may link properties together
-
Higher total gearing can mean tighter policy, pricing changes or LMI depending on the structure
Usable Equity Guide
-
Conservative equity release
Up to 80% LVR
-
Higher leverage
80 to 90% LVR
-
Best flexibility
Low debt and strong equity
How lenders assess equity for construction finance
Lenders review
Current valuation of the equity property- Existing debt against that security
- Fixed price building contract and plans
- Estimated completed value of the build
- Borrower income, liabilities and living costs
- Whether separate or combined securities are being used
- Risk of overleveraging if values or costs move
Typical timeframes
-
Equity valuation
Usually required
-
Cash deposit need
May be reduced
-
Total debt test
Serviceability still applies
-
Main trade off
More security at risk
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Common problems
Using equity can make construction finance easier to structure, but it can also create extra complexity around valuations, security and overall debt levels.
Not enough usable equity
A property may have equity on paper, but once lender LVR limits and existing debt are applied, the usable amount may be lower than expected.
Possible solutions include:
reduce total project cost- use additional cash contribution
- offer another acceptable security
- refinance to improve the structure
Cross security creates complexity
Using another home as security can complicate future refinancing, sales and discharge requests if the lender links multiple properties together.
Possible solutions include:
- request separate securities if policy allows
- use split lending where appropriate
- review exit strategy before settlement
- avoid over securing the deal if not needed
Too much debt against existing assets
Equity funded builds can look efficient at the start, but higher total debt means higher repayment pressure and greater risk if interest rates or costs rise.
Possible solutions include:
- keep a cash buffer outside the loan
- stress test repayments before approval
- avoid borrowing to the absolute maximum
- plan the post build refinance early
Steps to get Finance
Step
01
Confirm what equity is available in your existing property or land.
Step
02
Arrange valuations and review existing loan balances.
Step
03
Decide whether to top up, refinance, or use separate securities.
Step
04
Submit build documents, plans, costs and full financials.
Step
05
Complete formal approval and settle the structure.
Step
06
Progress payments are then released through the construction stages.
Speak with a Property Finance Specialist
Equity based construction finance can be efficient when structured properly, but the right setup depends on the value of your existing property, your current debt, and how the build will be funded from start to finish.
A specialist can review the equity position, calculate usable borrowing room, and help determine whether a top up, refinance or separate construction facility is the cleaner option.
Speak with a finance specialist about using equity for your build
Submit the short form below and a finance specialist can review your equity position and discuss how it may be used to support your construction finance strategy.
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