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Build Your Dream Home With Zenith
Whether you’re embarking on a major renovation or starting your homeownership journey from the ground up, Zenith is here to support you every step of the way.
With deep expertise and over 1,000 approved loans, we understand the unique demands of construction financing. Our team is committed to making your loan application process smooth and straightforward, so you can focus on bringing your vision to life.
Book an obligation-free telephone consultation to discuss how we can assist you with your construction loan.
What is a Construction Home Loan?
A construction loan is a home loan that gives you access to funds through progressive drawdowns to assist with different stages of your construction. This loan can be useful if you are completing major renovations, knock-down rebuilds or purchasing house & land packages.
Learn more about construction home loans and get started with your dream project with Zenith. Our team of expert mortgage brokers will facilitate your loan application and help you get the best rates and discounts available for construction loans.
How Do Construction Home Loans Work?
A construction loan provides the funds to pay your builder throughout the construction process or each stage of your renovation in instalments. These instalments, known as ‘progressive drawdowns’ or ‘progress payments’, are released as your construction project advances through its various stages, rather than receiving the entire loan amount upfront in one lump sum.
How Do Progressive Drawdowns Work?
After each stage is completed, the builder will issue an invoice. Before the lender releases the funds (progress payments) directly to the builder, they may instruct a valuer to inspect your property to ensure that each construction stage is progressing as expected.
Here are the typical five stages of construction plus deposit:
- Deposit – Usually 5% of your construction cost.
- Slab – Laying the foundation, levelling the ground, plumbing, and waterproofing the foundation. This is usually 10-15% of your construction cost.
- Frame – Building the frames, partial brickwork, roofing, trusses, and windows. This is usually 20% of your construction cost.
- Lock-up – Installing external walls, lockable windows, and doors. This is usually 20% of your construction cost.
- Fitout – Adding gutters, plumbing, electricity, plasterboards, and partially installing cupboards. This is usually 30% of your construction cost.
- Practical Completion – Finishing touches, final plumbing and electrical work, overall cleaning, and final payments for equipment and builders. This is usually 10% of your construction cost.
Your final progress payment may require a satisfactory final inspection by your lender’s valuer, confirming that the construction has been completed according to the original plans and specifications. Depending on your state, you might also need an occupancy certificate.
Benefit of Progressive Drawdowns
Paying each invoice as it arrives means you don’t pay interest on your total building costs until the work is done.
For example, if you have a $250,000 loan approved and the first invoice is for $50,000 (slab), you draw down just $50,000 instead of the full loan amount. This way, you only pay interest on the $50,000, not the whole $250,000. As you draw down more of the loan, the interest you pay will increase.
How Do I Get Approved for a Construction Loan?
Construction loans are assessed the same as a refinance or buying a home, with a small difference. Lenders will need to complete an ‘as if complete’ valuation to determine the market value of your land and proposed building or renovation. The ‘as if complete’ value will be relied on when determining the loan amount the lender can approve. Most of the time, lenders prefer 20% deposit for construction loans, however it is still possible to apply for construction loans with less deposit, where lenders mortgage insurance may apply.
To make the process as smooth as possible, it is recommended that you speak to mortgage brokers that specialise in construction loans. Contact us on 1300 312 712 or fill out our assessment form to learn what lenders look for in construction home loans and how you can get approved.
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For loan approval, the lender may request
- Fully executed fixed price building contract, this needs to meet industry standards (e.g. Master Builders Association or Housing Industry Association)
- Specifications and inclusions of the build
- Architectural drawings and engineering plans
First progressive drawdown
- Stamped council approved plans
- Builder’s All Risk Insurance – This covers risk to the building during construction.
- Domestic/Home Warranty insurance: You’ll need this if you’re using a registered builder. It covers risks such as non-completion by the builder due to death, insolvency or disappearance. Also covers structural defects due to builder negligence.
- Public Liability Insurance: Covers risks such as damage to property and injury to individuals.
Final invoice/final payment
- Provide signed invoice of the final stage issued from your builder
- Obtain insurance policy or certificate of currency for your building
- Provide certificate of occupancy or occupancy permit
To build your own home, there are some lenders out there that can lend up to 95% of the property’s value. Lenders Mortgage Insurance may be required if you borrow above 80% of your property’s value. There are LMI waivers that you may qualify for so it is important that you speak to one of our mortgage brokers to explore all options.
If you’re building an investment property, lenders typically lend up to 90%, although there are some exceptions. Different lenders have different policy niches when it comes to construction, and our team will be able to assist you by providing the right advice.
Unfortunately not, most lenders do not allow you to pick your own valuer. They normally have their own panel of independent valuers that they will pick from, and the reason for this is so there’s no conflict of interest.
Yes, there are lenders that offer construction loans for owner builders. As owner builders pose more of risk to them, lenders typically offer these loans on restricted terms, such as higher interest rates and/or lower LVR. To quality for an owner builder loan, there are also additional requirements and documentation that the lender would need to see before they feel comfortable approving the loan. We have lenders that specialise in lending to owner builders and we will work with you to select the most suitable option.
Yes, self-employed applicants normally qualify for construction loans (subject to normal credit criteria). There is generally no difference when applying for a construction loan whether you are PAYG or self-employed. Visit our self-employed page for further information.
Yes, first home buyers are eligible for construction loans (subject to normal credit criteria). As a first home buyer, you may also qualify for certain government schemes and grants. Visit our first home buyer page for further information.
Once your home loan application is unconditionally approved, generally the lender requires you to commence construction within 3-6 months and complete construction within 12-24 months. The specific timeframes depend on the lender.
How long your construction takes will depend on your builder. Typically, most homes are completed within 7-9 months of commencement. This is something you should confirm with your builder before signing contracts.
Usually, any additional costs outside of the Fixed Price Building Contract will need to be funded by the borrower. Depending on the lender, they may assist with additional lending to cover the increased costs. Prior to starting any construction projects, we always highly recommended that there are sufficient savings to cover any unexpected surprises.
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We understand everyone’s circumstances are different and we take the time to understand you and your goals. We value forming lifelong relationships with all our clients and we are fully committed to adding value every step of the way.
We know that mortgages can sometimes be complex and hard to understand. We focus on simplifying the process for you and we treat your loan as if it were our very own. Let us do what we do best so there’s one less thing for you to worry about.
Frequently Asked Questions
Partnering with a mortgage broker like Zenith can significantly streamline your home loan journey. We provide expert advice on loan products carefully tailored to your unique financial situation. By handling the legwork, comparing multiple options, managing paperwork, and negotiating better terms, we save you valuable time and help identify potential hidden fees. As we are not tied to any single lender, we can select the best loan for your needs, ensuring you secure the most suitable deal. Additionally, we proactively review your interest rate multiple times per year to ensure you remain on the most competitive rate available, maximising your savings and giving you long-term peace of mind.
Our services are provided at no cost to you. We receive compensation directly from the lender you choose once your loan is settled, ensuring that you can explore your options without incurring any upfront fees.
Each lender has unique criteria and requirements that must be met before they approve a loan. Our team takes the time to thoroughly analyse your credit history, income situation, and the specific strengths and weaknesses of your financial circumstances. This allows us to match you with the most suitable lender and loan package tailored to your needs. Our experienced professionals will provide you with comprehensive information, ensuring you have everything necessary to make an informed decision.
To begin, we’ll work closely with you to understand your goals and objectives. We’ll then gather and review all necessary supporting documents to ensure we have a comprehensive understanding of your situation. Once we have sufficient information to make a personalised recommendation, the next step will depend on the chosen lender’s processing timeline. This can vary from several weeks to a few months, which is why we strongly advise initiating the process as early as possible, especially when it comes to property purchases, where timing can be crucial.
You may not always qualify for financing from a specific bank. After assessing your unique situation, we’ll work to find you the lowest possible interest rate from eligible lenders. While interest rates are important, they’re just one piece of the puzzle. We’ll also help you consider all other fees and features associated with each loan option, ensuring you have a complete understanding of your choices and can make an informed decision that best suits your needs.
Typically, lenders require a minimum deposit of 5% of the property’s purchase price to secure a home loan. However, in some cases, it may be possible to proceed with a lower deposit. Keep in mind that if your deposit is less than 20% of the property’s price, you may need to pay Lenders Mortgage Insurance (LMI), unless you qualify for an LMI waiver or apply for a family guarantee. Contact us to explore your options and determine the best approach for your situation.
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