Construction loans
Building your own home involves a different financing process from your standard home loan.
What is a Construction Loan?
A construction loan is a specialised type of home loan designed for building a home or completing extensive renovations. Unlike traditional mortgages, funds are not disbursed all at once but are released progressively in stages as construction progresses.
How It Works: Progressive Drawdown & Repayments
Staged Payments: Funds are released in multiple drawdowns aligned with construction milestones—such as foundation, framing, lock-up, second fix, and completion.
Valuation Checks: A lender’s valuer will go out to site to inspect each stage before releasing subsequent payments. This ensures work completion of each stage and protect funds.
Interest Only on Drawn Funds: Borrowers pay interest only on the amount that has been distributed—not on the full loan amount—minimising interest expenses during construction. For example, if the first stage requires $30,000, interest is charged only on that $30,000. Once the next $30,000 is drawn down for the following stage, interest will then be calculated on the total $60,000 released.
Post-Completion: The loan converts to a standard principal-and-interest mortgage (unless an extended interest-only period is arranged).
Construction Stages & Drawdown Percentages
Here’s a rough breakdown of common construction stages and corresponding drawdown proportions:
Weighing the pros and cons
Process of Applying for a Construction Loan
Our brokers at WestGen Finance will guide you through a construction loan application, but to get a head start, there are some documents that are usually required from you. Documents include:
Council plans and permits
Professional building plans
Proof of land purchase (or intent if buying land/build package)
Proof of contract with a licensed builder
Proof of builder's insurance
Your builder should be able to provide these documents for your loan application for the lenders to access.
Ready to start building your dream home?
It just starts with a short strategy call with our mortgage brokers from WestGen Finance. Fill out the form below and we will get in contact with you shortly.
Get in contact
Get in contact
Fill in your details and we will give you a call within 24 hours.