Get answers to common questions about construction loans in Australia. Learn how to borrow, qualify, and finance your building project.
If you're considering building your dream home or undertaking a major renovation, a construction loan could be the perfect financing solution. Below, we answer the most frequently asked questions to help you better understand how construction loans work and how they can support your project.
How Much Can I Borrow for a Construction Loan?
The amount you can borrow with a construction loan in Australia depends on various factors such as your income, assets, debts, and expenses. Lenders typically also consider cost overruns and other contingencies to ensure both you and the lender are protected. To get an accurate borrowing estimate based on your financial situation, it’s best to speak with a construction loan expert, like the team at My Finance Agent.
What Documents Do I Need for a Construction Loan Application?
Applying for a construction loan requires more documentation than a standard home loan. In addition to typical requirements like proof of income and identity, you will need:
A signed building contract (ensure it includes an exit clause for financing).
The builder’s license and insurance details.
Approved building plans and specifications.
Quotes for additional building work (e.g., landscaping, fencing).
Relevant council approvals.
A quantity surveyor’s report.
Soil and engineering reports.
Our streamlined document management system makes it easy for you to upload and track your loan application and progress.
Can I Get a Construction Loan as an Owner-Builder?
Yes, it's possible to get a construction loan as an owner-builder, but the approval process may be more stringent. Lenders often have different policies and criteria for owner-builders, including the need for additional safeguards such as a quantity surveyor to verify your cost estimates. My Finance Agent has experience assisting owner-builders and can guide you through the requirements and approval process.
What Are the Stages of Construction?
Construction loans are typically disbursed in stages, with payments aligned to specific milestones in the building process. The standard stages of construction include:
Slab – Site preparation, foundations, and slab are laid (approximately 15-20% of the total cost).
Frame – The house’s internal frame is erected (approximately 20%).
Lock-up – External features like roof, walls, doors, and windows are installed (approximately 20%).
Fit-out – Installation of internal fixtures, including cabinetry and plumbing (approximately 20%).
Completion – The finishing touches are added, and the final site clean-up takes place (approximately 10%).
What Happens If I Go Over Budget During Construction?
Construction budgets can sometimes run over due to unforeseen expenses. However, lenders only disburse funds according to the agreed-upon progress payment schedule. If your invoices exceed the scheduled amounts, you will need to cover the difference from your own funds. Should you require extra financing, a new loan application and supporting documentation will be necessary. At My Finance Agent, we can assist with financial planning and budgeting strategies to help avoid overruns.
Can I Use a Construction Loan for Home Renovations?
Construction loans are generally used for building a new home or making substantial structural changes to an existing property. If you're planning smaller home improvements, a home equity loan or line of credit might be more suitable. These options provide the flexibility to finance smaller projects without the complexity of staged payments and building contracts.
Will I Qualify for a First Homeowner Grant if I Build?
Yes, as a first-time home builder in Australia, you may qualify for state or federal grants and other incentives. The First Home Owner Grant (FHOG) is available to eligible borrowers building their first home. The amount and eligibility criteria vary by state, so it's worth reviewing the requirements on your local government's website or discussing your options with My Finance Agent.
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Is a construction loan right for you?
Talk with one of our business finance experts who can guide you through the process and help find the best solution tailored to your needs.
Call us on (02) 8313-8400 or request a call back.
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