Construction Loans

Construction loans — how they actually work

A construction loan works very differently from a standard home loan. Rather than receiving the full amount upfront, funds are released in stages — called progress draw-downs — as each phase of the build is completed. This means you only pay interest on what's been drawn down, which keeps costs lower during the build period. Once construction is complete, the loan typically converts to a standard principal-and-interest mortgage. Understanding this structure — and choosing the right lender for it — is critical to a smooth build.

The stages of a typical construction loan

Most construction loans are drawn down across five stages: slab/foundations, frame, lock-up, fit-out, and practical completion. At each stage, your builder submits an invoice, the lender (usually) orders a valuation inspection, and the funds are released. I'll make sure you understand exactly what's required at each stage and that the draw-down schedule aligns with your builder's contract.

Land and build packages

If you're purchasing land and building together, there's additional complexity around sequencing the land purchase and construction loan. Some lenders require the land to be registered before they'll advance construction funds. Others have specific house-and-land package products that streamline the process. I work with builders across the Tweed Coast and Gold Coast regularly and understand how to structure these transactions to avoid delays.

What you need before you apply

• Fixed-price building contract from a licensed builder

• Council-approved plans and permits

• Land title or evidence of land purchase

• Builder's insurance and licence details

Construction lending requires more documentation than a standard purchase, but I'll give you a complete checklist and guide you through every step. I've helped clients build everything from modest first homes to substantial renovations, and I stay involved throughout the entire build — not just at application.