ALS Mortgage Solutions

Construction Loans Guide

Everything You Need to Know About Building Your Dream Home

Building your own home is one of the most exciting journeys you can embark on. Unlike buying an established property, construction loans work differently - they're designed to fund your build in stages as construction progresses. Understanding how these loans work is crucial to ensuring your building project runs smoothly from foundation to completion.

Whether you're building on vacant land, knocking down and rebuilding, or completing major renovations, this guide will walk you through everything you need to know about construction financing in Australia.

How Construction Loans Work

Progressive Drawdowns

Construction loans are typically drawn down in stages as the build progresses, rather than as a lump sum.

The Five Standard Construction Stages

Stage 1: Deposit (5-10%)

Initial payment to secure your builder and begin site preparation

Stage 2: Base/Slab (15-20%)

Foundation and concrete slab completion

Stage 3: Frame (20-25%)

Structural framing, roof trusses, and external walls

Stage 4: Lock-up (20-25%)

External cladding, windows, doors, and roofing complete

Stage 5: Fixing & Completion (25-35%)

Internal fit-out, plastering, painting, flooring, and final touches

Land and Construction Packages

Land and construction packages allow you to purchase land and fund the build with a single loan.

Key Considerations

  • Land settlement typically occurs first, followed by construction drawdowns
  • Your deposit requirement is usually based on the combined value of land and construction
  • First Home Buyer grants and stamp duty concessions may apply differently
  • Building contracts should include fixed-price clauses to protect against cost blowouts

What You'll Need for Approval

Requirements for approval include builder credentials, construction contracts, and detailed cost breakdowns.

Documentation Required

  • - Fixed-price building contract
  • - Council-approved plans and specifications
  • - Builder's licence and insurance details
  • - Land contract (if applicable)
  • - Detailed cost breakdown/schedule
  • - Standard income and ID documents

Builder Requirements

  • - Valid builder's licence
  • - Home warranty insurance
  • - Public liability insurance
  • - ABN registration
  • - Clean building history
  • - Fixed-price contract capability

Interest Rates and Costs

Construction loan interest rates may be higher than standard home loans and typically have different draw structures.

Additional Costs to Budget For

  • Council fees: Development applications, building permits, and inspections
  • Site costs: Soil tests, surveys, and site preparation
  • Connection fees: Water, electricity, gas, and sewerage
  • Landscaping: Driveways, fencing, and garden works
  • Contingency buffer: 10-15% for unexpected costs

Typical Construction Timeline

Typical construction timeline from approval to completion is 6-12 months depending on complexity.

1-2

Weeks 1-2

Site preparation and slab pour

3-6

Weeks 3-6

Frame erection and roof works

7-12

Weeks 7-12

External cladding and lock-up stage

13-20

Weeks 13-20

Internal fit-out, fixing, and completion

Tips for a Successful Build

Tips for a successful build including choosing the right builder and managing costs.

Get pre-approved first: Know your budget before signing any contracts

Choose a reputable builder: Check references, visit display homes, and verify credentials

Understand your contract: Know what's included and what are considered variations

Budget for extras: Allow 10-15% contingency for unexpected costs and upgrades

Stay involved: Regular site visits help catch issues early

Document everything: Keep records of all communications and variations

Ready to Build Your Dream Home?

Contact us to discuss your construction loan options.

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SMSF Guide

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