A construction loan is not one lump sum handed over at the start. It is released in stages as your home is built, and understanding that rhythm is the key to a build that runs smoothly.
Approval comes first, then drawdowns
The lender approves the total amount up front, based on your income, deposit and a valuation of the finished home from the plans and specifications. You do not receive it all at once. Instead, the loan is drawn down in parts.
Progress payments
A fixed-price build contract sets out payment stages. Common ones are:
- Deposit on signing
- Foundations and slab complete
- Frame up and roof on (closed in)
- Linings, fit-out and pre-line
- Practical completion and handover
As each stage finishes, your builder invoices you. You ask the lender to release that amount, and the funds usually go straight to the builder.
Inspections and valuations along the way
Before releasing a payment, the lender often wants confirmation that the work has actually been done — sometimes a quantity surveyor or valuer inspection, sometimes photographs and the builder's certification. This protects both you and the lender from paying ahead of progress.
Interest during the build
You only pay interest on what has been drawn, so repayments start small and grow as the house takes shape. The loan is typically on floating rate during construction because the balance keeps changing. Once the home is complete, you can usually fix the whole loan and move to normal principal-and-interest repayments.
Land and build together
If you are buying a section and building on it, the land purchase is usually the first drawdown, followed by the construction stages. Lenders will want to see that the combined land-plus-build cost stacks up against the finished valuation.
The finance side of a build is mostly about timing — making sure each progress payment can be released without holding up the site. Getting the structure right at the start is what keeps it quiet later.
This article is general information only and not personalised financial advice. Everyone's situation is different — get in touch for guidance specific to you.