Construction & Building Loans
Thinking of Building or Renovating? Get more control over the process with our construction Loan
Is a Construction Loan right for you?
You may consider using a Construction Loan if you want to:
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build a home on land you already own
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buy vacant land and build a home on it
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do major renovations to a property you already own.
With a Construction Loan, instead of lending you the whole amount upfront, we make a series of progress payments to your builder as they reach certain stages in the building process.
While they’re building, you only pay the interest on the loan; once the building is finished you start paying principal and interest, unless you arrange to stay on interest only.
What is a Construction Loan?
A construction loan is basically a home loan with the flexibility to make progress payments as the builder completes each building stage.
Instead of lending you the whole amount upfront, we pay the money directly to your builder as they complete each stage of the construction process.
Because we’re in charge of paying the builder, we can do inspections and ensure that they’ve done the work.
How do I prepare for a Construction
Loan?
There are a few things you need to do before you ask us about a Construction Loan.
Organise your builder
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find a reputable, licensed builder
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sign a fixed-price contract with them, showing the total cost and the conditions for the construction
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agree on a schedule of progress payments with them.
This payment schedule must follow the laws of your State or Territory, and the standard contract terms that the Housing Industry Association or Master Builders Association issue.
Get approvals
For many construction or renovation projects, you need your local council to approve your plans and building specifications. Ask your local council about what documents you need from them to show that you have all the necessary approvals.
Download our Guide to Residential Construction Loans for more tips
Our free Construction Loan Guide takes you through the process of building a home and applying for a construction loan. It gives you:
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an overview of the stages of construction
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information on the roles of the builder, the bank, the council and you
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a series of simple steps to follow to get your home built
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checklists to help you get everything ready for each stage of your project.
We’re here to help you build the home you want, and there’s a lot more to it than just lending you the money.
What you'll need for your application
Applying for the loan is easy. Here are some of the documents we will need from you:
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Clear title of the plot (sale deed/title deeds, prior chain if resale), latest property tax receipts, and an Encumbrance Certificate confirming no legal/financial charges.
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Copy of the building plan approved by the local authority and any required permissions/“permission for construction” or municipality approvals.
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Detailed cost estimate of construction prepared by a qualified civil engineer or architect, used for stage-wise disbursals.
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Construction agreement with the contractor/builder, plus a stage-wise construction schedule; some lenders may also ask for the contractor’s profile.
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Where applicable, local No Objection Certificates (NOCs) or utility/departmental clearances as per local regulations.
It’s okay if you don’t have all of this information yet. We can talk to you about a pre-approval while you arrange these documents with your builder / Seller.
After your Construction Loan has been approved
Getting valuations
We’ll organise one of our valuers to do two valuations: the first when you apply and the second when the construction is finished. We’ll let know if we need to do any other valuations during the build.
1. Start building
Once we agree to the loan, the builder has to start building within six months of the date of offer as set out in your schedule, and finish within 12 months from the date of your first progress payment.
2. Paying the builder
A builder usually requests payments as the construction progresses. The first payment is usually the deposit you paid when you signed the builder’s contract.
We pay the remaining amounts over five progress payments at each building stage:
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Slab stage
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Frame stage
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Lock-up stage
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Fit-out stage
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Completed/Final Stage.
As the builder completes each stage, they’ll request a progress payment. If you’re contributing your own money to the construction, your money will be used first, before using the loan.
Note: If you’re eligible for the First Home Owner's Grant, the government will only pay this to you after we make the first payment to the builder at the Slab stage.
3. Requesting progress payments
We’ll make the progress payments to the builder on your behalf. To enable these payments, at each stage you need to give us:
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a Progress Payment Authority to tell us the work’s done and authorising us to make the payment
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the builder’s invoice
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receipts for any payments you’ve made directly to the builder
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details of any variations you’ve made to the building contract.
When we receive these documents from you at each stage, we’ll pay the builder, although in some cases we may need to arrange a valuation first.
We typically pay the builder within five working days during the construction stages.
4. Final stage
At the Final stage you’ll have to give us some other details, including:
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a Certificate of Completion from the builder
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a Certificate of Compliance or Occupancy for the completed works
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a Building Insurance Certificate of Currency for the full replacement and reinstatement value, with us noted as the interested party.
We typically pay the builder within 10 working days of the Final stage to allow time to do a valuation.
Frequently asked questions
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