A construction loan or other wise known as a building home loan is secured by the property being built and paid back in stages as the construction work is completed.

To be eligible for a construction loan in Australia, borrowers typically need to meet certain requirements, such as having a good credit score, a stable income, and a deposit. It is also usually necessary to provide detailed plans and specifications for the construction project, as well as a budget and timeline for completing the work.

When You Apply

When you apply for a loan, the lender will need a copy of the building contract/tender and the plans.

They’ll ask their valuer to estimate the on-completion value of the property and will assess your loan on the lesser of the land price plus the cost of construction or the on-completion value.

If you’re building an investment property, some will even consider future rental income which can greatly improve your borrowing power.

Once your loan has been approved, the lender will issue a loan offer for you to sign and return, just like with any other home loan.

When your builder is ready to begin receiving payments from the bank, he’ll need to provide additional documents, such as the final council-approved plans, his insurance and drawdown schedule.