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LOAN TYPES

Types of Construction Loans

  • 1. Standard Construction Loan

    Progress payments over five stages. Interest-only during the build, then switches to a principal-and-interest loan after completion.

  • 2. Owner-Builder Loan

    For those managing their own build. Requires 30–40% deposit or equity due to higher lender risk.

  • 3. Fixed-Price Loan

    Based on a fixed-price building contract. Offers protection from budget blowouts and is preferred by most lenders.

  • 4. Turnkey Construction Loan

    Pay 10% upfront, then settle once the build is complete. Ideal for buyers who want a hands-off build process.

  • 5. Cost-Plus Construction Loan

    Used for high-end or custom builds. Covers actual costs plus builder margin, suitable when project costs may vary.

Plan Your Loan Smartly!

Lenders love a well-prepared borrower. Use our repayment calculator to forecast your construction home loan commitments and show you're financially ready for a construction loan.

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ALTERNATIVE CONSTRUCTION LOANS

Flexible Options for Unique Borrowers

Explore alternative pathways to get your construction home loan approved, even if you're self-employed or need family support.

1. Low-Doc Construction Loans

Ideal for self-employed borrowers with limited documentation, though they come with higher rates, fees, and deposit requirements.

2. Guarantor Construction Loans

A family member’s property equity can help you reduce your deposit needs and potentially avoid Lenders Mortgage Insurance.

CONSTRUCTION HOME LOAN APPLICANTS

Who can apply for a construction loan?

First-Home buyer

Existing homeowner

Investors or developers

A self-employed borrower

Owner-Builder

Guarantors

Why Choose US

Specialists in Construction Home Loans

Navigating a construction loan is more complex than a standard mortgage—and that’s where we come in. With deep knowhow in every type of construction finance, from standard builds to owner-builder and low-doc loans, we help you secure the right solution with confidence and clarity.

Book a free assessment

Tailored Advice

We guide you through every step, matching the right loan type to your unique build and financial position.

Timely Approvals

Our streamlined process and construction-specific knowledge help prevent delays and get your project off the ground as per your construction plan.

Lender Access

We work with a wide panel of lenders, including those who offer low-doc and guarantor construction loans, giving you more options and more suitable outcomes.

Ongoing Support

From land purchase to final drawdown, we stay with you to manage progress payments and any issues that arise along the way.

We compare loans from a wide range of lenders

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CORE ESSENTIALS

Construction Loans Made Easy

What is a construction loan?

A construction loan is a loan secured against a property that is being built and progressively drawn down as the construction work is being completed.
To be eligible to get a construction loan in Australia, borrowers generally need to meet eligibility criteria and need to meet certain requirements, such as having a good credit history, demonstrating stable income and having a deposit. It is also usually a requirement to provide detailed floor plans and building specifications for the construction project, as well as a budget and timeline for completing the work.

Different types of construction loans

Construction Loans come mainly in five types:
  • Standard Construction Loans: These loans are the most basic form of construction home loans. Funding is released in progressive payments across the five construction stages: slab, frame, lock-up, fit-out, and completion. During construction, you pay interest only. After construction, the loan converts into a principal-and-interest home loan.
  • Owner-Builder Construction Loan: If you are an owner builder and facilitating your own contractors, an owner-builder loan might be a great option. The only issue is that most lenders require a larger deposit or equity of approx. 30-40% of project value.
  • Fixed-Price Construction Loan: A fixed-price construction loan requires a fixed-price building contract with a licensed builder. This type of construction loan protects the clients against cost overruns but may have less flexibility for changes. Lenders prefer this option, as it reduces financial risk to the client.
  • Turnkey Construction Loan: These loans fund properties that are fully completed by a builder before settlement. Generally, the builder will require 10% deposit upfront and balance on completion. The loan is fully funded at settlement and buyers typically pay a deposit upfront, with the balance due on completion.
  • Cost-Plus Construction Loan: These loans are generally for more complex build that have high risk of cost overrun. To avoid builders from absorbing unforeseen cost. Builder will request Cost Plus builder margin. These construction loans are more common for luxury build and commonly found in high end architecturally designed property.
Please contact us on (03) 9034 5223 or enquire online and our team can assist.

Alternatives of standard construction loans

  • Low-Doc Construction Loans: These loans are designed for self-employed borrowers with limited financial documentation. They generally attract higher fees and higher rates with larger deposit requirement. Not all lenders offer low doc construction loan.
  • Guarantor Construction Loan: Family members usually parents or siblings can use their equity in their property as security to assist with purchasing the land and constructing a new home. If you are a first-time home buyer with limited savings and have the means to repay the loan, this loan can be suitable for you, as it reduces the deposit requirement and may also help avoid Lenders Mortgage Insurance. When the property has gone up in value you can remove the guarantor and convert to a normal loan once you have enough equity.
Please contact us on (03) 9034 5223 or enquire online and our team can assist.

Who can apply for a construction loan?

You can apply for a construction loan if you are:
1. First-Home Buyer
If you are a first-home buyer, you must make a deposit of at least 20%, or as low as 5% with Lenders Mortgage Insurance (LMI). You may be eligible for a First Home Owner Grant (FHOG), Hirst Home Loan Deposit Scheme (FHLDS) or stamp-duty concessions in some states.
2. Existing homeowner (extending or renovating)
If you already own a house and want to extend, upgrade or renovate it, you can use equity in your existing home as a deposit. For structural renovations, you may need council-approved plans, building specifications, fixed price build contract and progress claim terms.
Some common examples are:
  • Swimming pool
  • Pergola
  • Driveway
  • Power pole / power connection
  • Landscaping
  • Site clearing
  • Shed, dam or other hobby farm improvements
3. Investors Or Developers
Some lenders may require a higher deposit for investor or developers.
4. A Self-Employed Borrower
If you are self-employed, you can apply for a low-doc loan if you have an ABN, GST registration, and financial statements. Normally you will need a larger deposit between 20-30% due to higher fees and lower risk tolerance of the lender.
5. Owner-Builder
Some lenders accept owner-builder loans, but they require:
  • Strong income to support the loan.
  • A detailed construction plan and cost estimates.
6. Guarantors
A family member (usually parents) can use their home equity to secure the loan for you. It helps reduce deposit requirements and may allow you to avoid LMI.

People that may struggle to get a construction loan

  • People with bad credit history
  • People with unstable employment or irregular income
  • People with no deposit or minimal savings
  • People who want to be owner-builders without sufficient experience (some lenders will not approve them).

What are the requirement of a standard construction loan

  • A fixed-price building contract with a licensed builder
  • Council-approved plans and permits
  • Proof of income (PAYG payslips or for self-employed financials and tax return)
  • Deposit (usually 20%, but some lenders allow borrower to borrow with only 5%)
  • A good credit score to get lower interest rates and lower fees.

How does a construction loan work?

Construction loans work differently than standard home loans.
During the construction period the bank will only charge interest-only repayments, which is divided into 5 stages such as slab, frame, lockup, fitout and completion. This payment method helps reduce risk to the borrower and the bank and is called ‘progress payment’.

Construction loan application process

1. Assess credit score and financial stability
To apply for a construction loan the bank wants to know that you have a good credit score and good income to debt ratio to assess your means of repaying the loan. Because lenders check your existing debts, credit cards, and loan repayments history, it is important to maintain repayments within the contracted time frames. This helps increase your chances of approval.
2. Proof of income
You now need to show proof of income and employment. If you are a PAYG employee, you can use your recent payslips and tax returns. For self-employed applicants, you need to provide business financials, ABN, GST registration, tax returns and notice of assessment.
3. Pre-approval
Before construction starts, lenders provide a pre-approval based on your financial situation. This ensures you have funding secured before signing the build contract.
4. Deposit and equity
Normally you will need to deposit 20% of the total project cost. Some lenders accept 5-10% with Lenders Mortgage Insurance. If you are an existing homeowner, you can use your equity instead of cash as a deposit.
5. Fixed-price building contract
You will need a fixed-price building contract from a licensed builder. The contract will need to outline the total construction cost, timeline, and scope of work.
6. Council approved building plans and permits
You also need proof from the local council of approval for your design and construction. This ensures that you are building within the compliance with zoning laws and regulations of the area that you are building in.
7. Builder insurance and home warranty insurance
The builder you chose for the construction must have public liability insurance and construction insurance. In some states, Home Warranty Insurance is also required, for protection against defects.

Progress Payment Schedule

Construction loans are paid in stages based on completion of each milestone:
  • Slab Stage – Foundation laid
  • Frame Stage – House framework completed
  • Lock-Up Stage – Windows, doors, and roofing installed
  • Fit-Out Stage – Interior fittings, electrical, and plumbing done
  • Completion Stage – Final inspections and handover
After each stage, lenders will send a valuer to check the work before releasing the next payment.

Why use a mortgage broker to assist with a construction loan?

Here are some reasons of using a mortgage broker:
Access to a range of lenders
Comparing across over 30 lenders and having an established relation allows us to find options that suit your needs. Our specialised brokers can help you find lenders that understand construction loans, which increases your chances of getting your loan approved.
Receive personalised guidance and support
At Everrich Finance, our team of experienced brokers not only provide you with personal guidance and we also take time to understand your situation so we can help you structure your loan effectively.
Experience matters
Construction loans are complex, as they require progressive payments, variations to building plans, and specific documentation. A skilled mortgage broker with experience in construction loans will help you avoid pitfalls on your way to getting a home loan.
Negotiate preferred loan terms, fees and rates
At Everrich Finance we have experienced brokers that deal with construction loans on a regular basis. With access to multiple lenders, we have a good understanding of policies, terms, current market rates and fees. With this knowledge we can use this to your advantage and negotiate on your behalf, potentially securing you a lower interest rate, reduced fees, and more favourable loan conditions.
Saves you time and effort
It can be extremely time consuming to research, compare, apply and manage a construction loan. At Everrich Finance our mortgage brokers take all this grunt work off your plate. We help gather your financial information, research suitable loan products, prepare and submit your application, manage communication with lenders and assist you with your progress claim.
Tiresome forms and paperwork
At Everrich Finance our broker helps you collate the documents required so we can ensure your application is complete and accurate to increase your chances of loan approval.

How does construction loans work?

When you apply for a loan, the lender will need a copy of the building contract with the plans and permits. The bank will instruct the valuer to estimate the on-completion value of the property and will assess your loan on the lesser of the land price plus the cost of construction or the on-completion value.
If you’re building an investment property, some will consider proposed rental income which can greatly improve your borrowing power.
Once your loan has been approved, the lender will issue a loan offer for you to sign and return.
When your builder is ready to begin receiving payments from the bank, they will need to provide additional documents
  • Building Permit and Stamped Approved Plans
  • Contract Works Insurance
  • Public Liability Insurance of the Builder
  • Domestic Builders Warranty Insurance
  • Invoice from builder
  • Progress claim form
Please contact us on (03) 9034 5223 or enquire online and our team can assist.

Tips for construction loan

Getting approved for a building loan is only half the battle. Having an experienced mortgage broker that can help you navigate through the construction loan can reduce the risk of things going wrong.
We’ve outlined some tips on how you can get approved for your construction loan to minimise the delays that might occur.

Ask your bank to pay your builder directly

  • The builder will send you an invoice.
  • You will need to complete a progress claim form.
  • Send the signed progress claim form and the signed invoice to the construction department of your bank
  • The lender may require a valuation to confirm the work that has been completed.
  • The funds will be advanced to your builder generally within five working days.
  • Repeat this process for each progress payment required by the builder.

Make sure each stage is completed before completing progress claim request

  • At each stage of the build, you should have a walkthrough to ensure that the property is being built to specifications and to quality.
  • We would generally recommend hiring a building consultant to inspect each stage on your behalf so you can be sure that no corners have been cut.

Set your expectations

  • Each lender has different processes for construction loans.
  • Banks often assign inexperienced staff to construction loans, leading to poorly designed systems.
  • Loan documents frequently get lost, and credit officers' poor communication skills cause delays and misunderstandings.
  • Patience is required and choosing the correct lender is important
  • Construction loans often have errors, such as incorrect loan amounts or delays due to constant changes.
  • Everrich Finance brokers works hard to pre-empt and prevent these issues from arising and guide you through the process.

Don’t make changes to the building contract

  • A change in your building contract can trigger a full loan reassessment by the lender, causing up to a six-week delay and potential extra charges from the builder.
  • To avoid issues, ensure the building contract you submit to the lender is final and complete.
  • For minor changes, cover the costs yourself or arrange for the builder to reimburse you after construction.
  • For major changes, notify the bank and allow up to a month for reassessment.
  • Keeping things transparent with the bank helps prevent significant delays.

Include minor quotes

  • It's common to hire contractors for additional work like landscaping, utility connections, swimming pools, or site works.
  • Try to include these quotes when submitting your application for approval.
  • Discuss this with your broker and your builder, as it may not always be possible to include landscaping, fencing and pool in your contract.
  • Banks may only release funds for additional quotes after construction is complete.
  • Be careful, as you might have agreed to pay the contractor upfront.
CONSTRUCTION HOME LOAN FAQ

Construction Home Loans: Your Questions Answered

  • 1. Can I separate the land and construction components of my loan?

    If you're purchasing land, consider splitting the loan into a "land loan" and a "construction loan," allowing them to be advanced at different times. Otherwise you'll need to put all your required funds in at the time the land settles.

  • 2. When is LMI Charged?

    Any LMI will be charged at land settlement. Your broker at Everrich Finance will discuss this with the lender to confirm their process and find out when you'll be required to contribute your deposit.

  • 3. What happens if I need to change something in the building contract after my construction loan is approved?

    Changes to the building contract after loan approval can trigger a full reassessment by the lender, causing delays of up to six weeks and possible extra charges. It’s best to submit a finalised contract and cover minor changes yourself where possible.

  • 4. Can I include landscaping, fencing, or a swimming pool in my construction loan?

    Yes, but only if the quotes are included upfront during the loan application process. Some banks won’t release funds for these extras until the main construction is complete, so always check with your broker and builder before including them.

  • 5. How do progress payments work and who pays the builder during construction?

    Builders invoice you at each construction stage. You must complete a progress claim form and submit it with the invoice to your lender. After a valuation, the bank pays the builder directly, usually within five business days.

  • 6. Do all lenders allow owner-builder construction loans?

    No, many lenders are cautious with owner-builder loans due to higher risk. Those that do usually require strong income, a large deposit (30–40%), and detailed construction plans with cost estimates.

  • 7. When is Lenders Mortgage Insurance (LMI) charged on a construction loan?

    LMI is typically charged at the land settlement stage, not when construction begins. Your broker will confirm the lender’s process and help you understand how much you'll need to contribute upfront.

  • 8. Can expected rental income be used to increase my borrowing capacity on a construction loan?

    Yes, some lenders consider projected rental income when assessing construction loans for investment properties. This can improve your borrowing power, but the property type, location, and rental appraisal must meet their criteria.

  • 9. I’m renovating my existing home—can I use my home equity instead of a cash deposit?

    Absolutely. If you’re extending or renovating, you can use the equity in your current home as a deposit. You’ll still need council-approved plans, a fixed-price contract, and progress payment terms for structural renovations.

  • 10. I’m self-employed with limited financial records—can I still apply for a construction loan?

    Yes, through a low-doc construction loan. These are designed for self-employed borrowers and typically require an ABN, GST registration, and business financials. Be prepared for higher interest rates and a larger deposit requirement.

  • 11. As an owner-builder, can I build an investment property and still get finance?

    It’s possible, but very few lenders allow owner-builder loans for investment purposes due to the risk. You’ll need a strong financial profile, a large deposit, and detailed building plans to improve your chances.

  • 12. Can I include the cost of a swimming pool or driveway in the main construction loan contract?

    Yes, but only if these items are quoted and included in the initial building contract. Otherwise, the bank may not fund them until after the main build is complete. Plan ahead and discuss this with your broker and builder.
    Please call us on (03) 9034 5223 and speak to one of our mortgage brokers. Our team will work out the best way to structure your loan.

Testimonials

Love from Clients

James Kang of Everrich Finance is an absolute professional who provides an excellent customer service for you. Being a first home buyer, he helped me through the whole process and was ready…

Abdul Mubeen
First Home Buyer

Murray was recommended by a friend and I’m so happy he was! He listened to exactly what my needs were when looking to purchase my first home and he certainly…

Natalia Jankovic
First Home Buyer

I have been dealing with Murray on my home loan on a property that I purchased. Being the first home buyer and getting a home loan you all know isn't…

Hemal Sethia
First Home Owner

As first home buyers, the process was straight forward, we were kept in the loop the whole time, and every question (even the silly ones) were answered timely without judgement. We learnt…

Rebecca Giarrusso
First Home Owner

Murray was absolutely wonderful to work with! He helped me with everything I needed to purchase my first home and was quick to respond to any calls and emails. Highly recommend Murray…

Melinda
First Home Owner

Just wanting to thank James and his team for helping us with purchasing our first home. This experience couldn’t have been any better. Thank you once again 🙂

Julianne Cordeta
First Home Owner

Find Out Your Eligibility Today

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