What is a construction loan?
A construction loan most commonly has a progressive drawdown. This means you receive instalments of the loan amount at various stages of construction, rather than receiving it all at once.
How it works- Loan repayments will start at settlement (when become the land owner). Your home loan will only be for the amount borrowed to purchase your land.
- Your mortgage repayments will gradually increase throughout each stage of construction as the bank releases funds to your builder.
- You will only be making repayments for the interest portion until your home is built (or for up to 12 months) depending on the lender, so repayments are more affordable and easier to manage.
- Once your home is completed, your mortgage will revert to a standard principal and interest loan, so you can start paying down your mortgage and building equity.
When do repayments start?
At settlement, the lender pays for your land and you will start making repayments from this date. During each build stage, your repayments will gradually increase as the bank releases funds to the builder.
How much will I pay?
The amount you will need to pay during construction will depend on the home loan balance, interest rate and build time-frame. Your bank or mortgage broker should be able to provide you with estimated projections on what you can expect to pay.
It's important to factor repayment amounts into your budget plan. So you're prepared in advance. With Build Assist, we provide $5,000 in rental assistance during construction - making it more affordable for our clients to build a brand new home.
Repayment schedule
Here’s a general example of how a construction loan might look when borrowing $500,000 to purchase house and land.
| Build stage | Current loan amount | Weekly repayment (4% interest rate) |
| Land only | $200,000 | $154 |
| Deposit stage | $215,000 | $165 |
| Base stage | $260,000 | $200 |
| Frame stage | $320,000 | $246 |
| Enclosed stage | $395,000 | $304 |
| Fixing stage | $455,000 | $350 |
| Final stage (Home loan reverts to principal & interest) | $500,000 | $550 |
■ Interest only period
Build Assist is here!
Building a new home is even better with Build Assist. We're providing our $10,000 deposit boost plus+ $5,000 in rental assistance on select house and land packages! Find out if you qualify for a new home purchase today!
