Construction Loan

Construction Loans Australia


Do you need help financing the construction of your new home or investment property? Are you planning a major renovation, extension or knockdown/rebuild? If so, you may want to consider getting a construction loan. Whether you are a property developer, a commercial builder or you’re looking to build or renovate your own home, construction loans can be the ideal solution.

No matter where you are in the property cycle, the right loan and structure can make all the difference. This is why it’s so important to seek expert advice before applying for finance.

A trusted construction loan broker can help you access the best rates and terms for a wide range of construction home loans. Having the best finance to suit your needs will ensure that your project is completed on time, with minimal issues.

At Sunshine Coast Financial Solutions, our experienced team of brokers can help you secure a competitive loan that is ideally suited to your particular circumstances. We can help you throughout the entire process, from initial consultation right through to post-settlement.

For access to the best range of construction loans in Australia, book a free consultation with the team at Sunshine Coast Financial Solutions today.

What Should You Know About Construction Loans?

If you’re thinking about applying for a construction loan, you probably have a lot of questions. For instance, you may be wondering:

Initially, the whole process may seem a little overwhelming. But fortunately, it doesn’t have to be. Our expert team of brokers have put together the ultimate guide to construction finance so you can find answers to all your questions and make informed decisions.

What Are Construction Home Loans?

Construction loans are typically short-term loans designed to finance the construction or renovation of existing properties. Unlike traditional mortgages, the funds are usually released in stages as the construction work progresses.

One of the main benefits of having a construction loan is that you’ll only pay interest on the funds that have already been released. Once construction is complete and all of the funds have been released, then you can either convert the loan into a permanent mortgage or arrange for the balance to be paid off in full.

When applying for a construction finance loan you will generally need to provide the lender with a detailed scope of work and an itemised budget for the proposed build. The lender may also require a larger deposit when compared with a traditional home loan.

Construction home loans may be suitable for individuals or developers planning a range of projects, including:

  • Building a new home
  • Large-scale renovation
  • An extension on an existing property
  • Knock-down and rebuild
  • Commercial construction project
  • Property development

How Do Construction Loans Work?

So, how do construction loans work?

Unlike traditional home mortgages, loans for construction are usually released in stages or “drawdowns” as the construction project progresses. This means that you won’t receive the full loan amount upfront once your loan settles. Instead, you’ll receive the funds in instalments as certain milestones are reached in the construction process.

For example, you may receive an initial percentage before the work begins to cover the cost of preliminary tasks. Once the house slab or foundation works are complete, you’ll receive another percentage. This will continue until the project is complete and all funds have been released.

The drawdowns you receive from the lender will mirror the progress payment schedule outlined in your building contract. As work progresses, you’ll need to send your lender copies of the builder’s invoices and progress reports so that they can organise for funds to be released to the builder. This helps to keep the project on track and guarantees that the released funds are being used properly.

Construction loans usually have a short loan term, ranging from just six months to up to two years. Once the project is complete, you’ll have the option of converting your loan into a traditional mortgage or paying off the balance of the loan within the specified term.

Why Are Rates for Construction Loans Higher Than a Standard Mortgage?

A couple comparing interest rates

You may have heard that interest rates for construction home loans are higher than those applied to a standard mortgage. While this might initially seem outrageous (are the lenders just trying to rip you off?!), there are actually some valid reasons why lenders charge more for construction finance:

1. Higher Risk

Construction projects come with a higher level of risk for lenders. If the project is delayed, the quality of the workmanship is subpar or if the project experiences significant delays, then the completed property may have cost more to build than what it’s now worth.

2. Short-Term

Any short-term investment will carry a higher level of risk than a long-term one. Since a construction home loan has significantly shorter terms (compared to a 30-year mortgage), the higher rates can help offset the risks.

3. Variable Costs

There’s always the possibility that labour and material costs may fluctuate over the course of a 6-12 month construction project. This variability is factored into the costs charged by the lender.

4. No Collateral

Unlike a traditional home loan, a construction project lacks the necessary collateral to cover the cost of the loan. If you were to default on your loan, the lender wouldn’t be able to recoup costs by selling the property “as is”.

5. Added Administration Costs

When you have a construction loan it creates a lot more admin work for the lender (since funds are continuously being disbursed). The lender will include these added costs when determining your interest rate.

So, should you be wary of construction finance products because they come with higher interest rates? Generally, no.

Despite having higher interest rates, a construction finance arrangement still comes with a great range of benefits. For example, with a construction loan, you’ll gain interest-only repayments, only be charged interest on funds once they’re released and you’ll have the option of converting to a traditional mortgage upon completion (with a more competitive interest rate).

Overall, the benefits of a construction loan will go a long way towards offsetting the short-term impact of being charged higher rates. If you’re planning a large-scale construction project, they can be the ideal finance solution.

What Is the Typical Payment Schedule for a Construction Loan?

A typical payment schedule for construction financing will include 6 distinct payment drawdowns, including:

A couple inspect the frame of their new home


Before construction starts, you’ll usually provide the builder with an initial deposit. This is generally 5% of the loan total.


Once the concrete slab or house foundations are complete the builder will invoice for the foundation’s payment. This should be around 15% of the project total.


This stage includes the completion of the internal wall frames, support structures, electrical and plumbing conduits and insulation, and will usually be about 20%.


This is once the site can be “locked up” and the windows, doors, external walls and roofing are completed. The lock-up stage will be another 20%.


Invoiced once the internal fittings and fixtures have been installed. This may include lights, power points and other electrical and plumbing fixtures. This will be approximately 30% of your total funds.


Once the final cosmetic details are completed and the site has been cleared of leftover materials or building rubbish, you’ll be invoiced for the final 10%.

What can you use a construction loan for?

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Building a New Home

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Renovating a Property

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Knock-down and Rebuild

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Developing a Property

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Commercial Construction

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Completing an Extension

What is the best loan structure for construction loans?

The below are the most common loan structures for construction loans that you can select based to fit your personal circumstances best:

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Progress Payments

Your lender will release funds to you at different stages of the construction process, such as when the foundation is poured or when the roof is installed. This will help you ensure that you have the funds you need to complete each stage of the build.

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Interest-Only Payments

With an interest-only loan structure, you’ll only be required to make payments on the interest accrued during the construction period (making payments more manageable). Once completed, the loan will typically convert to a standard principal and interest home loan.

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Receiving a Line of Credit

A line of credit loan structure allows you to draw down the necessary funds as you need them. A line of credit can be useful if your proposed construction project is more complex or if you’re working with a custom builder who requires more flexible financing arrangements.

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Construction to Permanent

Your loan will start out as a standard construction loan with funds progressively released during the building phase of the project. The loan will then automatically convert to a permanent home loan (with an extended loan term) once construction is complete.

A team of professionals help in constructing a new home

How Can You Efficiently Draw Down a Loan for Construction?

Efficiently drawing down a loan for construction requires careful planning and good communication with your lender. Here are some tips to help you streamline the process:

Create a Detailed Budget and Timeline

Have a comprehensive budget and timeline for your project written out in detail. Determine all estimated costs, including materials, labour, permits and fees, as well as a realistic timeline for each stage of the construction process.

Work With an Experienced Builder

An experienced and reputable builder can help you stay on track and within budget. They can also help you avoid costly mistakes or unnecessary delays. Your lender may also require you to work with an approved builder or contractor.

Work With an Experienced Builder

An experienced and reputable builder can help you stay on track and within budget. They can also help you avoid costly mistakes or unnecessary delays. Your lender may also require you to work with an approved builder or contractor.

Have Good Communication With Your Lender

Throughout the construction process, keep your lender informed of your progress and any changes to your budget or timeline. This can help ensure that your loan funds are released in a timely and efficient manner (so work can continue unhindered).

Submit All Required Documentation Promptly

Your lender will likely require specific documentation at various stages of the construction process, such as building plans, invoices and proof of insurance. Make sure you submit these documents promptly to avoid delays in the loan drawdown process.

Manage Your Cash Flow

Proper management of your cash flow includes ensuring that you have adequate funds on hand to cover any unexpected expenses or delays, as well as managing your loan drawdowns to ensure the completion of each stage of the project.

How Do You Apply for a Construction Loan?

Getting the right advice before undertaking a construction project will ensure you get the best loan to suit your needs. With the help of a broker, you’ll have a clear understanding of all the loan details (even the fine print!) and you can get an accurate timeframe for your project finance.  

Talk to one of our brokers today to help set your construction project on the right path.

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How Can SCF Solutions Help With Your Construction Financing?

At Sunshine Coast Financial Solutions, we specialise in helping our clients obtain the financing they need to build or renovate their dream home or commercial property. With our industry expertise and personalised approach, we make the construction loan process simple and stress-free, so you can focus on your construction project.

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Get The Right Loan For Your Needs

We take the time to understand your unique circumstances and financial goals, so we can recommend loan products that suit your specific needs and preferences.

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Assistance With Your Application

Our decades of industry experience allow us to provide expert advice, guidance and assistance with paperwork. This means we can take care of the details for you.

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Wide Panel of Lenders & Products

We can give you access to a great range of loan products and competitive rates — whether you’re a first-time homebuyer, property investor or business owner.

FAQs on Construction Loan

A construction loan is ideal for funding major renovations, such as a complete revamp of the internal layout, updating kitchens and bathrooms or a proposed extension. If you’re planning a smaller renovation (such as a simple cosmetic upgrade), then there may be other finance arrangements better suited to your needs. For tailored advice, contact the team at SCF Solutions.

It’s also important to note that these loans are designed to cover the cost of construction works only, not the purchase of the property or land. So, if you’re renovating a property that you already own, you’ll need to have equity in the property or be willing to use other assets as collateral to secure a construction loan. Construction finance for renovations is subject to similar lending criteria as loans for new builds, which may include detailed building plans, council approval and regular progress inspections by the lender.

Generally, no. With a construction loan, you only pay interest on the amount of money you have drawn down to date. This means that as you draw down more funds to pay for construction costs, your interest payments will increase.

Once your project is complete and your home is ready to move in, your construction loan will typically convert to a regular home loan, and you’ll start making regular principal and interest mortgage repayments.

Generally, they’ll have a loan term of six to 12 months, although some lenders may offer terms of up to 24 months. Once construction is complete, the loan will usually convert to a regular home loan with a term of up to 30 years.

Standard construction home loans are typically only available when a borrower is using a licensed builder. However, you may be eligible for an owner-builder loan instead. Owner-builder loans are similar in structure to a standard construction loan, but they’re designed for individuals who are building their own homes and who will be responsible for the construction process themselves.

Owner-builder loans can be more difficult to obtain since an owner-builder is taking on a greater level of responsibility. As an owner-builder, you’ll be in charge of obtaining permits, hiring subcontractors and overseeing the entire construction process. Because of this, lenders often require additional documentation and approvals.

Yes, most lenders will require an initial deposit, which can range from 10% to 20% of the total loan amount.

You’ll generally need a credit score of at least 680 to qualify for a construction loan, although some lenders may require higher scores. You’ll also need to show that you have an acceptable deposit, a stable income and the ability to make minimum repayments on your loan.

Prior to loan approval, you’ll need to provide detailed plans and specifications for your construction project, including cost estimates and timelines. If you’re working with a builder, they’ll need to have a track record of completing similar projects successfully. You’ll likely also need to get an appraisal to determine the value of the property once construction is complete, as well as sufficient insurance to protect your property during construction and after completion.

Typically, the loan is disbursed in predetermined stages as the construction project progresses. The lender will inspect the work at each stage and release funds as each milestone is completed.

Some lenders may require you to use a builder that is approved by the lender, while others may allow you to use your preferred contractor.

The approval process for construction finance can vary and can take several weeks or longer. To ensure your loan application is processed as soon as possible, it’s a good idea to consult with a broker.

What our Clients Say

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I’ve recently had the pleasure of working with the team at Sunshine Coast Financial Solutions to secure a new mortgage. Throughout the entire process, communication was clear, professional & friendly. I was kept up to date and was well informed every step of the way. I wholeheartedly recommend Sunshine Coast Financial Solutions to anyone in need of expert mortgage advice & assistance.
This is the 3rd time we have used SCFS, this time for an investment property and refinance overall.Chris advised us to what our best options were taking into account taxable nature of investment and how best we structure between that and our owner occupied.The team at SCFS found us a much better rate overall and have infact reduced our monthly payments.Chris and team (Adam, Darryl, Shanina) keep you updated every step of the way and make the process seamless and easy even when we have had more complicated lending requirements.We have had the pleasure of referring several of our friends to SCFS who have been equally impressed. We are based in NSW, and absolutely no issues being in a different state.If you are after a personal service, and one that continues to proactively manage the best deal for you ongoing this team will look after you.
Very helpful team with excellent communication throughout the whole process. Would definitely use again and highly recommended!
The team was friendly and very easy to deal with. They made the process of getting a loan easy by walking us through every step.
The experience we had with Sunshine Coast Financial Services was incredible. They were professional, knowledgeable and reassuring from the start of our house purchasing journey right to the finish.Apart from all the team, we were lucky enough to have Daryl Hermann assisting us.He was so positive, helpful, encouraging and always happy to answer any questions that I had and there was plenty….Thanks to SCFS we are now the proud owners of a home we could only have dreamt of.Without a shadow of doubt I would highly recommend anyone looking to purchase a home to give these guys a call.I know I certainly will when I choose to purchase another property.
Easy to deal with, happy with the results
Very supportive, available, thorough and professional- highly recommend.
My partner and I were super keen to get into the property market and reached out to Chris and his team as a result from reading these outstanding reviews and they did not disappoint. The team have been nothing but transparent throughout every process of building our first home and answered all our questions in record time. Thank you for your continuous support! Anyone needing assistance needs to look no further then SCFS! If I could put 10 stars I would.
Just wanted to thank Chris Wilson and Tracey Butler for looking after me again with my home loan. My fixed rate is expiring soon. Weeks ago Chris contacted me to discuss my options, the process and a plan of attack.Tracey diligently stepped in right on cue and executed the plan with a superb outcome. A better than expected interest rate, not just for now but for the future of my home loan. I couldn't be happier.This team makes you feel like they step into their customers shoes as if it was their own home loan. They strive to do everything they can for their customers and in such a friendly and professional manner. Thank you again Chris and Tracey.
Efficient, helpful and honest advise. Highly recommend
What a treat it was to work with Chris and his team, they are extremely professional and we're able to find me a much better deal on my home loan. I'm now saving thousands each year! I couldn't recommend him highly enough 👍
Sunshine Coast Financial Solutions worked magic for this first home buyer. The home-buying process is very daunting for newcomers, when searching for your dream home it's hard to know the usual steps and who to trust. Chris and Adam from SC Financial Solutions provided professionalism and attention to detail each step of the way, helping to relieve stress and bring peace of mind knowing we were in safe hands throughout this life changing decision. I'll recommend SC Financial Solutions to everyone searching for an award-winning knowledgeable, reliable and responsive brokerage team.
This new homeowner is thrilled to leave a review for Chris and his colleague Adam at Sunshine Coast Financial Solutions. These mortgage wizards worked their magic on a loan for me, comparing all leading banks of Australia, with a great result. Their efficiency and advice meant I could make a fast and easy settlement. Chris and his team have made our first home buying experience so much easier.If you need a mortgage, I couldn’t recommend enough🌞🏡 Sunshine Coast Financial Solutions 🌞🏡
Excellent service, fast and efficient. I have been using the SCFS team for years and recommend them to anyone for finance solutions. You lean back and relax while they do the hard work and find you the best deal. Very happy 😊
Today is approval day something I did not think I would be doing in this day and age with how life has been but thanks to the team at SCFS it's all been made possible and easy couldn't recommend a greater team, will definitely be using them for my next few houses
I've been using Sunshine Coast Finance for a number of years over which time they have taken care of the finance for 3 properties, I can't recommend them enough.
On behalf of my wife and I, We highly recommend Chris and his team for your financial needs. They made our process feel smooth and enjoyable, and we will definitely be returning in the future for their services.
My husband and I have worked with Daryl for a while now and the experience has been nothing but beyond exceptional. The work he puts in to help us is incredible. We would be lost without his expertise and guidance. We couldn’t recommend Sunshine Coast Financial Solutions more highly.
It was the first time for me to buy a house. I really had no idea how complicated it is. The Sunshine Coast Financial Solutions team support was amazing; they took care of everything and negotiated a very convenient interest rate. The communication was also fantastic. Great result with a minimum effort. Highly recommended
Absolutely amazing service. From start to finish the communication was 100%. We were kept up to date throughout the entire process and always felt supported. Daryl was so easy to talk to, responded to every question we had and I cannot thank him enough, we really appreciate all that he did for us. I will not hesitate using their service again in the future and have passed on their details to friends! Thankyou again for everything!
Excellent professional and friendly service, excellent communication, kept us informed throughout process. Highly recommend
The team at scfs are awesome. Thank you so much for making my home refinance a breeze. I've been asked by few people now, how I got this so quickly. I said "my broker is the gun". Thank you so much Chris, Shanina, Adam, Daryl and Tracey, for all your hard work, and dealing with me. Definitely 5 stars👍
I highly recommend Chris and his team @ SCF Solutions to anyone going through a divorce or any other life transition that involves financial decisions.Chris’s expertise, practical approach, and easy-going nature provided the clarity I needed to make informed decisions about my financial future. Chris’s open and honest manner empowered me with a strong understanding of my financial position and lending capability which eased the burden associated with the division of the matrimonial home. He treated me like a priority and provided valuable guidance and support every step of the way as I navigated through an emotionally challenging time.Communication during critical times in the process such as loan approval and settlement was outstanding, even when this fell over the Christmas/New Year period. Someone from his team was always available to answer any questions or concerns and provide reassurance when needed.Second time I have engaged Chris over the past 8 years, and I can proudly say I will remain a lifelong customer!If you want the best possible mortgage to suit your specific financial situation then you can’t go past Chris and his team.
Chris and his staff members are always very helpful and informative.
Another brilliant experience with the SCFS team. Excellent from start to finish - thanks so much Chris and the team 👍
Excellent, thank you
My partner and I had Jo and Shanina from SCF help us with our home loan, everything was quick and effortless which is what we wanted. Highly recommend them!We also just had a 1 year review from Tracey and she ensured we were still getting the best rate 🙂
Chris and his team have helped me again to buy a property which was a stress free and quick process. I have complete trust in Chris and would highly recommend his business.
Chris and the team have been very helpful throughout the process keeping me informed every step of the way.SCF saved me lots of money from my current loan and will keep an eye on it from now on.Well done team
Adam and the team made our process super easy and they were very helpful. Would definitely recommend them ☺️
Chris and his team made financing our new home purchase a smooth process that left nothing to chance. With his support we were able to confidently bid on and secure our dream home and he made sure we had the very best deal we could achieve in record time.Chris coached us through each step and was always available to answer our questions and provide guidance when we needed it.Overall his team is professional, friendly, helpful and always approachable.We couldn't have achieved the result we did without his help and we would definitely use his services again.We can thoroughly recommend Sunshine Coats Financial Services and Chris Wilson to anyone looking to arrange their finance. You won't be disappointed!
Chris & the team have been fantastic from start to finish. Patient, professional & supportive throughout the whole property purchasing journey. They have gone above and beyond to help me into a property, I am very happy with my experience from start to finish. I can’t speak highly enough of their transparent and professional approach.
Once again, Chris and the team at SCF have provided us with excellent service. They are professional, efficient and always available to answer questions and concerns. We would highly recommend them.
I recently purchased my home using the SCF Solutions for my financial needs, and I must say that I had a fantastic experience. The person who handled all my transactions on my behalf, Daryl Hermann, was extremely meticulous and efficient. His attention to detail and promptness in completing all the necessary tasks left me truly grateful. I highly recommend SCF Solutions for anyone in need of financial services. Thank you, Daryl, and the entire team at SCF Solutions for your outstanding support!
Chris and his team were absolutely fantastic.Clear and transparent from the start, SCF made the experience of buying our home seamless.Highly recommend SCF for your lending solutions.
So much thanks to Chris and the team at SCFS. We had a very difficult and compressed settlement subject to many finance extensions. The whole way through the journey the whole team were absolutely professional and got us into our new home.I Very highly recommend there services toAll.Your sincerelyCraig Jenkins & Katherine Thompson
Adam and the team at SCF have been fantastic in finalising my re-finance. Adam provided insightful knowledge on lenders that would be more suited to my situation and the best avenues to go forward with. He achieved my expected result within a really short timeframe. No question was too silly. Can’t recommend Adam enough.
The team were amazing to work with. They made the process so easy, kept us updated on the process and gave us multiple options to achieve our goals. Couldn’t recommend them enough!!
Chris and the team make it so easy and hassle free. Cannot recommend them highly enough and wouldn't use anyone else apart from them.
Chris is very professional and always does everything to help us out!
Chris and the team were fantastic in helping us get our mortgage for our first home in Australia. They helped us through the process and were supportive, attentive and helpful throughout the entire process. I would heartily recommend SCF!
Chris was great to deal with, straight to the point and got what we needed done. Explains everything you need to know in detail.Extremely happy with the outcome 👌🏻
I am a repeat client of Chris and his team. In every experience I have had has been 100% positive. Chris and his team do everything possible to make every step through the process explained and run smoothly. I highly recommend anyone looking to finance or refinance to talk to Sunshine Coast Financial Solutions.
the scfs team were fantastic from start to finish in getting my new loan. Nothing was a problem for them. Getting everything sorted very fast. Very fast replies and always keeping you updated.I can't recommend daryl and the team enoughThanks again
Chris, Shanina and the rest of the team were so super helpful, understanding and really got the best rate for me! Not only that their communications were so clear, consistent and they were always available for help and advice! Would highly recommend to anyone!! Thank you team!!
SCFS have assisted us with brokerage a few of times now and Chris, Matt, Shanina and the team have been fantastic every time!