Building your dream home in Queensland is an exciting journey, but understanding construction finance can feel overwhelming. Whether you're planning a custom design on suitable land, tackling a renovation, or purchasing house & land packages, knowing how construction loans work is crucial to making your project a reality.
At Get Approved, we help Queenslanders access Construction Loan options from banks and lenders across Australia, ensuring you get the right funding solution for your building project.
What Is New Home Construction Finance?
Unlike a standard home loan, construction finance is designed specifically for building projects. Instead of receiving the entire loan amount upfront, funds are released progressively as your build reaches certain milestones. This means you only charge interest on the amount drawn down, which can save you thousands of dollars during the construction phase.
A construction to permanent loan is particularly popular among Queensland homeowners because it converts from a construction loan into a standard home loan once your build is complete. This eliminates the need to reapply for finance and go through the approval process twice.
How Construction Funding Works
When you apply for building new home finance, lenders will assess several factors:
- Your borrowing capacity and financial position
- The loan amount required for your project
- Whether you have council approval and a development application
- Your building contract with a registered builder
- The construction draw schedule and progress payment schedule
Most lenders require you to commence building within a set period from the Disclosure Date, typically 6-12 months. This ensures the valuation and project costings remain current.
Understanding Progressive Drawdown
Construction loans operate on a progressive drawdown system, releasing funds in instalments as work progresses. Your lender will conduct a progress inspection before releasing each payment to ensure the work has been completed to the required standard.
A typical Progressive Payment Schedule includes:
- Base stage - laying the foundation
- Frame stage - structural framing complete
- Lockup stage - roof, windows, and doors installed
- Fixing stage - internal fittings, plumbing, and electrical work
- Practical completion - final inspection and handover
Each drawdown typically incurs a Progressive Drawing Fee, which covers the lender's cost for the progress inspection and administrative work. These fees vary between lenders but usually range from $250 to $500 per drawdown.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Get Approved today.
Construction Loan Interest Rates and Repayments
During the construction phase, most lenders offer interest-only repayment options. You'll pay interest only on the funds drawn down, not the total loan amount. This keeps your repayments manageable while your home is being built.
Construction loan interest rates are typically similar to standard home loan rates, though some lenders charge a slightly higher rate during the building phase. The interest rate you receive depends on factors like your deposit size, credit history, and whether you choose a fixed or variable rate product.
Once construction is complete and you move into your new home, the loan converts to principal and interest repayments, and you can make additional payments to reduce your debt faster.
Types of Construction Projects We Can Finance
At Get Approved, we specialise in various construction finance scenarios:
Land and Construction Package: Perfect if you've found suitable land and want to build a custom home. This single loan covers both the land purchase and construction costs.
Land and Build Loan: Similar to above but structured for those purchasing house & land packages from developers.
Owner Builder Finance: If you're managing the build yourself and coordinating plumbers, electricians, and other sub-contractors directly.
Custom Home Finance: For unique, architect-designed homes built under fixed price building contracts.
Project Home Loan: Funding for project homes from volume builders with fixed price contracts.
House Renovation Loan: Whether it's a major extension or complete overhaul, renovation finance helps transform your existing property.
Home Improvement Loan: Smaller renovations like kitchen or bathroom updates.
Spec Home Finance: For builders constructing homes for resale.
Off the Plan Finance: Purchasing apartments or townhouses before construction is complete.
Fixed Price Contracts vs Cost Plus Contracts
Most lenders prefer fixed price building contracts because they provide certainty around the total project cost. Under a fixed price contract, your builder agrees to complete the work for a set price, protecting you from cost overruns.
A cost plus contract, where you pay the actual construction costs plus a builder's margin, can be harder to finance as it carries more risk for both you and the lender. However, some specialist lenders do offer this option.
Council Approval and Development Applications
Before your construction loan application can be approved, you'll need council plans and building approvals in place. Your lender will want to see:
- Approved development application
- Council approval or complying development certificate
- Detailed building plans and specifications
- Engineering reports (if required)
- Fixed price building contract from a registered builder
These documents demonstrate that your project is viable and complies with Queensland building regulations.
Choosing the Right Construction Finance
Every building project is unique, which is why we work as your renovation Finance & Mortgage Broker to find the right solution. We compare construction funding options from multiple lenders to ensure you're getting an appropriate interest rate and loan structure for your circumstances.
Whether you're building your first home, upgrading to a larger property, or investing in quality construction, having an experienced broker on your side makes the construction loan application process smoother.
We'll help you understand the progress payment schedule, plan for progress payments to pay sub-contractors on time, and ensure your builder receives funds when needed to keep your project moving forward.
Your Building Project Funding Partner
Building a new home or renovating your existing property is one of the biggest financial commitments you'll make. Having the right construction finance partner ensures your project runs smoothly from breaking ground to moving in.
At Get Approved, we're experienced in all aspects of construction funding across Queensland. From first home buyers building their initial property to experienced investors developing multiple projects, we've helped countless Queenslanders build their dream homes.
Ready to discuss your building project? Call one of our team or book an appointment at a time that works for you. Let's turn your construction plans into reality with the right funding solution tailored to your needs.
