Construction home loans—sometimes called construction mortgages—are specialised lending products designed for people building a new home or undertaking major renovations. Instead of releasing the full loan amount upfront, the lender provides funds in stages as construction progresses.
The property under construction usually serves as security. Repayments are generally interest-only during the build phase and shift to standard terms once the construction is complete.
Lenders typically assess construction loans using a loan-to-value ratio (LVR). In some cases, the maximum LVR may be up to 95%, although this figure may vary depending on lender policy and your financial situation.
A construction loan usually includes a drawdown period—commonly around 24 months—within which all funds must be accessed. If you’re purchasing vacant land and planning to build later, a separate land loan may be required.
As part of the loan application, your lender will request:
The lender may then arrange an independent valuation based on the proposed completed property. Loan approval is typically based on the lower of the land value plus construction cost, or the valuer’s completed property estimate.
Where the property is intended as an investment, some lenders may also consider projected rental income as part of the assessment. Once approved, the lender issues a loan offer for your review and acceptance.
Whether you’re building your very first home or planning to purchase an investment property, it’s worth exploring the personalised options available through first home buyer loans and investment loans, especially if you’re considering government incentives or relying on projected rental income to support your application.
If you’re getting a residential rental property, reviewing guidance from the Australian Taxation Office may help you understand potential tax implications or deductions that could apply, depending on your circumstances.
A clear application, supported by accurate documentation, may improve your chances of approval. Lenders usually look for:
Lenders will also require:
Your income, assets, and liabilities form the basis of the lender’s assessment. Be prepared to provide full financial documentation, including recent payslips, tax returns, and bank statements.
When considering your borrowing capacity, it’s worth factoring in broader household expenses and the general cost of living in Australia, as these can influence your long-term repayment ability.
The application process for a construction loan differs slightly from that of a traditional home loan. Additional planning and coordination are often needed. You may improve your outcome by ensuring:
Once your construction loan is approved, funds will be disbursed in stages. Each stage usually aligns with key construction milestones:
Your lender may require inspections at each stage before releasing the next payment.
When construction is completed and all payments are disbursed, the loan typically converts to a standard home loan. Your lender may request final documentation and conduct one last valuation or inspection.
Before moving in, it’s a good idea to walk through the property with your builder to identify any outstanding work. Addressing these items early may help avoid post-settlement disputes.
If your build includes energy-efficient features or sustainable design elements, you might be eligible for specialised green home loans that reward environmentally conscious construction.
Building a home is a significant project—whether you’re starting fresh or undertaking a major renovation. Understanding how construction loans work can help you plan with more confidence.
At Ausfirst Lending Group, we help you navigate construction lending requirements and compare lenders who offer suitable solutions for your build. We aim to support your planning process, help prepare your documentation, and guide you through to settlement.
Start building your future today. Contact us to begin your journey!
Securing the right loan should be a personal journey, not a transaction. That's why when you choose us, you deal directly with Richard, the founder, who brings over 30 years of hands-on experience managing diverse loan projects across Queensland.
Unlike larger brokerages where you become just another file number, Richard personally oversees every client's loan process—whether you're purchasing your first home, refinancing, expanding your investment portfolio, or acquiring commercial equipment. His extensive industry knowledge ensures you receive tailored advice, a smooth application experience, and solutions that align with your long-term financial goals.
We’re not just mortgage brokers; we’re your trusted lending partners. With a commitment to transparency, accessibility, and genuine care.
In other words, you are not passed between departments—you are looked after by someone who treats your financial success as his own.
Speak to Richard Today →Whether you're buying your first home, refinancing, or exploring loan options through a trust or SMSF, we’re here to guide you every step of the way. As your trusted Mortgage Broker on the Sunshine Coast, we offer personalised advice tailored to your needs.
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The required deposit varies by lender and is influenced by your LVR, build costs, and other risk factors. It's often beneficial to continue saving throughout the build period. Avoiding unnecessary expenses during construction may help preserve your loan servicing ability.
Some lenders may allow an increase to the approved loan amount to cover additional costs, provided the changes are documented and supported by updated estimates. Approval for such changes depends on lender policy and your revised borrowing capacity.
Combining a construction loan with a guarantor loan is possible, but not all lenders support this arrangement. It can be more complex than standard lending. A mortgage broker can help identify lenders who may offer this option.
In some cases, splitting land and construction finance may provide more flexibility—especially if settlement for the land occurs before construction begins. LMI (Lenders Mortgage Insurance) and other costs may apply depending on the timing and structure. It's helpful to clarify this early with your broker and lender.
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