Knock-down rebuild, major renovation, land and build or a duplex: a construction loan pays the builder in stages as each one is certified, and you pay interest only on what has been drawn. Charles structures it the way builders invoice.
The lender approves a total facility on your land plus a fixed-price building contract, then releases funds to the builder at each inspected stage: deposit, slab, frame, lock-up, fixing and completion.
You pay interest only on the amount drawn, so the early months cost little and the cost steps up as the build progresses. Approved plans, home warranty insurance and a licensed builder are required before the first drawdown.
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Charles looked after us really well and his knowledge gave us the confidence to purchase our property. He wasn’t pushy and always ensured we felt comfortable with the repayments.
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I have had a number of dealings with Charles from Links Property Finance. He is very knowledgeable, thorough, and detailed with his advice. Importantly, he is very approachable and easy to deal with. His advice has been beneficial to myself and my acquaintances. I highly recommend him.
| Deposit | Contract signed. Commonly 5%. |
|---|---|
| Base or slab | Site works and the slab poured. Commonly 10%. |
| Frame | Wall and roof frames up. Commonly 15%. |
| Lock-up | Roof, external walls, windows and doors in place. Commonly 35%. |
The shares shown are a common schedule in NSW building contracts; your own contract sets the exact stages and percentages. The lender pays the builder at each stage after an inspection, and you pay interest only on what has been drawn. Factory-built homes are paid for differently; see modular and prefab home loans.
Charles Touma, Mortgage Broker.
An ordinary mortgage advances once, against a finished home. A construction loan advances progressively against a build in progress, with a valuer or the lender’s inspector signing off each stage before the builder is paid.
Interest is charged only on what has been drawn, and the loan converts to normal repayments after the final inspection.
A fixed-price contract from a licensed builder, council-approved plans and specifications, home warranty insurance where it applies, and a valuation of the finished home on which the whole facility is based. Cost-plus contracts and owner-builder projects need specialist lenders.
Land you already own counts as equity, which is why many builders need little cash.
Variations and overruns are paid by you unless the lender agrees to increase the facility, which needs a fresh assessment and valuation.
Lenders normally want a contingency in the original figures, so a buffer of five to ten per cent of the contract is built in from the start rather than requested mid-build, when the frame is up and the options are fewer.
Most lenders set a build period, commonly 12 months from the first drawdown, and extensions need approval with an updated schedule from the builder. Home warranty insurance is the fallback if the builder cannot finish.
Interest keeps accruing on the drawn amount, and you still pay rent or your existing mortgage, so the contingency should cover time as well as cost.
A construction loan is for a home you will live in or keep: one house, a knock-down rebuild, a granny flat or a duplex you hold. The lender assesses your income and the finished value.
Once the project is several dwellings, a subdivision, or homes built to sell, lenders treat it as development: they assess the costs and expected sale prices, may want pre-sales, and usually lend a smaller share of the cost.
A duplex built to sell one side can fall either way. See property development finance and duplex finance.
Most lenders require a fixed price contract from a licensed builder, with council approved plans and home warranty insurance where required. Cost plus contracts and owner builder projects are harder to finance and need specialist lenders. Variations after approval may require extra funds from you.
Usually 20 per cent of the land plus build cost, which avoids lenders mortgage insurance; some lenders accept 10 per cent with insurance.
Land already owned counts as equity, which is why buyers who settled the land first often need little cash.
No. Interest is charged only on the amount drawn so far, so the first months after the slab cost a fraction of the final repayment. Repayments rise with each stage and convert to principal and interest, or the structure you chose, once the final inspection is done.
Only with a narrow set of lenders, usually at a lower loan-to-value ratio and with more of your own cash in the project. Owner-builder loans need the permit, detailed costings and often a 20 per cent contingency; a licensed builder on a fixed-price contract opens the full panel.
The builder invoices at each stage set out in the contract, the lender inspects or has a valuer confirm the work, and pays the builder directly from the facility.
You sign off each claim. Nothing is paid for work that has not been certified, which protects you as much as the lender.
Yes: council or complying development approval for the demolition and the new home, before the lender funds the build. The lender values the finished house, not the one being knocked down, and any existing loan is refinanced into the construction facility.
Yes. The 5% Deposit Scheme covers land-and-build and house-and-land purchases within its caps, and the $10,000 First Home Owner Grant applies to new homes, including a build. The scheme place and the pre-approval have to stay valid through the build, so the timing is planned at the start.
Thirty minutes with Charles: your equity, the contract shape, the drawdown schedule and the contingency, mapped before they become commitments.
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General information only, not credit advice. Construction lending terms, stage definitions and eligibility depend on your circumstances, your building contract and each lender's current policy. Government scheme details change and are assessed by the administering bodies and your lender.
Official sources for the figures on this page: Revenue NSW, First Home Owner (New Homes) Grant. Scheme rules change; the official pages are the final word. Checked against these sources on 12 October 2026.
