Building or renovating your home.
Construction loans and renovation finance are structured differently to standard home loans. Getting the right setup from day one makes all the difference.
How construction finance works.
Construction loans are drawn down in stages (called progress payments) as your build progresses — you only pay interest on what's been drawn.
Land & plans
Secure land and finalise building plans with a licensed builder.
Loan approval
Construction loan approved based on land value + build cost.
Progress draws
Funds released in stages: slab, frame, lock-up, fixing, completion.
Interest only
You pay interest only on drawn funds during construction.
Full loan starts
At completion, your loan converts to a standard home loan.
Which type of finance do you need?
The right finance structure depends on whether you're building from the ground up or renovating an existing property.
- Construction loan: for new builds or major structural renovations — funds released in progress payments
- Home equity loan / cash-out refinance: for smaller renovations using equity you've built up
- Personal loan: for smaller cosmetic renovations under $50,000 where securing against property isn't practical
- Fixed price building contract required for most construction loans in Australia
- Owner-builder loans are available but harder to obtain — lenders assess your skills and project management capability
Before you sign a building contract
Construction projects that go over budget are common. Protect yourself with these steps before you commit.
- Always use a licensed builder with a fixed-price contract and builder's warranty insurance
- Build in a 10–15% contingency buffer for cost overruns — construction almost always runs over
- Get independent building inspections at each progress payment stage
- Understand your sunset clause — the date by which the builder must complete the project
Common questions.
Yes — in most Australian states, the FHOG applies specifically to new builds or substantially renovated homes (where the purchase price/build cost doesn't exceed the state's threshold). This makes building an attractive option for first home buyers in states like Queensland, where the FHOG is $30,000 for new builds.
Unlike a standard loan where the full amount is advanced at settlement, a construction loan releases funds in stages as each build milestone is reached. You only pay interest on the amount drawn — so repayments are lower during the build phase. Once construction is complete, the loan converts to a standard principal and interest home loan.
Yes — if you've built up equity in your home (your property's value minus what you owe), you may be able to access it via a loan top-up, line of credit, or refinance. Most lenders allow you to borrow up to 80% of your property's value (including the renovation cost). A broker can calculate your available equity and find the most cost-effective way to access it.
Ready to build your dream home?
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