Construction Loan Calculator

How a Construction Loan Works in Australia

A construction loan is built for people building a new home or doing major structural work, rather than buying an established property. The defining difference is that you do not receive the full loan at settlement. Instead, the lender releases the money in stages, called progress payments or drawdowns, as your builder completes each milestone of the build. You only pay interest on the funds drawn so far, which is why your repayments during the build are far lower than they will be once the loan converts.

Because the lender is funding a property that does not fully exist yet, construction loans carry more conditions than a standard home loan. You will need a fixed-price building contract with a licensed builder, council-approved plans, and the right insurances. The lender values the project on an "as-if-complete" basis, sends a valuer to inspect before releasing each payment, and charges a fee for each drawdown. This is the trade-off for a structure that protects both you and the lender from paying for work that has not been done.

The Stages of an Australian Build

Most builds follow a 5 to 6 stage progress payment schedule. The deposit (around 5%) is paid at contract signing. The slab or base stage (around 15%) covers the foundation. The frame stage (around 20%) is when walls and roof trusses go up. Lockup or enclosed (around 20%) is when external walls, windows and doors are installed and the home can be locked. Fixing or fit-out (around 30%) covers internal linings, cabinetry, tiling and the rough-in of plumbing and electrical. Practical completion (around 10%) is the final stage before handover. The percentages vary slightly by builder, lender and state, and the Northern Territory uses a different split with an extra final completion stage. You can edit the percentages in the calculator above to match your own building contract.

How Interest Is Calculated During the Build

This is the part most calculators get wrong and most first-time builders misunderstand. During construction, interest is charged daily on the balance that has actually been drawn, not on the full approved loan. If your loan is $600,000 but only $280,000 has been drawn by the slab stage, you pay interest on $280,000. As each stage completes and more is drawn, the balance grows and your interest-only payment rises with it. By the final stage, you are paying interest on close to the full loan.

Take a worked example. On a $600,000 loan at 6.49%, your monthly interest after land settlement might be around $1,500. By the time you reach lockup, with most of the loan drawn, that monthly figure climbs towards $3,000. This steady climb is sometimes called "interest creep," and it is exactly what the progress draw schedule above is designed to show you. The total interest you pay across the whole build is the sum of these rising monthly amounts.

What Changes When the Loan Converts After Handover

Once your build reaches practical completion and the final inspection passes, the construction loan converts to a standard home loan. Two things change at once. First, the full loan balance is now drawn, so interest is charged on the whole amount. Second, you start repaying principal as well as interest. The combined effect is a significant jump in your monthly repayment, often well above what you were paying during the build. The build vs post-build tab above quantifies this step up for your numbers. Budgeting around the post-handover figure, not the comfortable build phase figure, is one of the most important things you can do before signing a contract.

Licensed Builder vs Owner-Builder Finance

How you build dramatically changes your finance options. With a licensed builder on a fixed-price contract, you have access to the widest range of lenders and the highest loan-to-value ratios, typically up to 80% without Lenders Mortgage Insurance and sometimes 90 to 95% with LMI added. Owner-builders, who manage the trades and the build themselves, are treated very differently. Most lenders cap owner-builder loans at around 60% of the project value, require an owner-builder licence, and demand a quantity surveyor report plus signed quotes from licensed trades for every line item. Only a small number of lenders write these loans at all. Unless you have genuine building experience and substantial equity, a licensed builder is usually the simpler and cheaper route to finance. You can read more on our owner builder loans page.

Why Contingency Matters and How to Size It

Cost overruns are the norm, not the exception. Variations you choose, unexpected site conditions, retaining walls, and material price rises all add up, and a fixed-price contract only protects you on the base scope. The standard advice across the industry is to budget a contingency buffer of 10 to 15% of the contract amount, and 15 to 18% if it is your first build. The smart way to hold it is in cash or an offset account against your loan, where it reduces your interest until you actually need it, then is available immediately when a variation lands. Running a build with no contingency is how people end up putting overruns on credit cards at 20% interest.

Construction Loan Rates and Fees in 2026

Construction loan rates are usually variable during the build and tend to sit slightly above standard home loan rates, because lenders see a partly built home as higher risk. As of June 2026, competitive owner-occupier construction rates broadly sit between 5.8% and 6.8%, with sharper rates from some online and non-bank lenders and higher rates from the major banks. Beyond the interest rate, expect a progressive drawing fee of roughly $200 to $500 for each drawdown, plus valuation and inspection fees at each stage, since the lender inspects the work before releasing funds. These costs are higher than a standard home loan and are worth factoring into your budget.

A Note on Stamp Duty

One advantage of building is that in most states you only pay stamp duty on the land value, not the construction contract, provided you buy the land and the building contract separately and construction has not started. On a project where the land is $350,000 and the build is $450,000, you pay duty on the $350,000, not the $800,000 end value. This can save tens of thousands compared to buying an established home of the same value. The exact treatment depends on your state and contract structure, so confirm with your conveyancer. We have left stamp duty out of the headline repayment figures and applied it to land only in the cost breakdown.

How to Use This Construction Calculator

Start by choosing your builder type, since that sets the lending limits the results are checked against. Enter your land value, your fixed-price contract amount, a realistic contingency, and the cash or equity you are contributing. Set your build duration and the rate you expect. The progress draws tab shows your drawdown schedule and how interest rises stage by stage. The build vs post-build tab shows the repayment step up when the loan converts, which is the figure to budget around. The stress test tab shows what happens if rates rise during the build, and the cost breakdown tab gives you the all-in number. When you are ready, talk to a specialist who can match your project to the right lender.