Build or renovate your property

Thinking of renovating your home? Or even looking to build from scratch? If so, having an understanding of how a construction loan works, can help. Here’s an overview and some important things to bear in mind.

What is a construction loan?

It’s a loan to help customers looking to build a home, complete major renovations or renovate or for construction undertaken by a business.

Rather than receiving a lump sum of money to purchase an existing property like a regular home loan, construction loans have progressive drawdowns. This means that instalments of the loan are provided at different stages of the construction.

Interest is then paid on the amount that has been drawn down, rather than the amount of the full loan.

The loan is charged as ‘Interest Only’ during the construction period, and will revert to Principal and Interest (P&I) afterwards.

Things to consider

Here are some general things you should keep in mind when considering a construction loan. Each bank will have different options and fees available.

  • Minimum deposits – the amount of funds you contribute prior to the first draw down.
  • There will be standard costs for the bank to inspect and make a valuation on the build.
  • Applying for top-ups if more money is required.
  • Progress payments or draw downs, made by the bank to the builder at different stages of the construction process.
  • Fees and charges – you’ll usually need to cover settlement, discharge, progress inspection valuation and progressive draw down fees.


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This page is designed to provide general information of an educational nature only. Information provided is of generic nature and does not take into account any specific individual needs, nor do the contents of this page constitute to any legal of financial advice. You should consider the appropriateness to your circumstances before acting on any information provided.