Construction & Renovation Loans

Get a Mortgage to Build or Renovate

A construction/renovation loan is specifically designed for borrowers who are building or substantially renovating their home instead of buying an established property. Unlike a traditional home loan (where you borrow funds as a lump sum), a construction loan has a progressive drawdown structure. It’s paid out in stages, allowing you to progressively draw down on the loan throughout the construction process. During construction, you’ll only pay interest on the amount you draw down, and the full loan amount becomes due when the work is completed.

Before construction begins, your builder will prepare a document outlining the total cost of the build, which is then split into stages (typically five stages). This breakdown helps set up a payment schedule with your lender.

Key Takeaways about Construction Home Loans:

• Construction home loans are paid in instalments during each stage of your build, known as progressive drawdown.

• You’ll only pay interest on the amount you draw down during construction and on the full loan amount when work is completed.

• When applying for a construction loan, you’ll need to submit building contracts and obtain council approvals.

How Do Repayments Work on a Construction Loan? Repayments during the construction stage are interest-only, and you’ll start making principal and interest (P&I) repayments when the build is completed. As a result, your repayments will be lower initially and gradually increase as your construction progresses to completion.