Construction Loans

Build your chances of loan success.

Construction finance works differently to a standard home loan. We'll help you navigate it.

Building your own home or undertaking a major renovation is a different kind of lending journey. Instead of one lump sum at settlement, construction loans are drawn down in stages as the build progresses. This means your lender needs to understand the project, approve the builder, and manage progressive drawdowns — which adds complexity that not all brokers handle well.

At Cumulus Capital, we understand the construction lending process inside out. Whether you're building a custom home on vacant land, buying a house-and-land package, or doing a knockdown-rebuild, we'll find the right lender and structure the finance to match your build timeline.

Key areas to think about

Loan structure

Construction loans typically involve interest-only payments during the build period, with the loan converting to a standard home loan at completion. Drawdowns are released at agreed stages — usually slab, frame, lock-up, fixing, and completion. We structure the loan to match your builder's payment schedule.

Builder requirements

Lenders require your builder to be licensed and registered, carry appropriate insurance, and provide a fixed-price building contract in most cases. Not all builders meet every lender's requirements — we match you with a lender that's comfortable with your specific project.

Cost management

Construction projects can encounter variations and unexpected costs. We help you understand the contingency requirements lenders expect, how variation processes work, and what happens if the build runs over budget or timeline.

How we can help

Project assessment

We review your building plans, contract, and budget to identify the most suitable lenders for your project.

Progressive drawdown management

We coordinate the drawdown process with your lender and builder at each construction stage.

Transition to home loan

Once construction is complete, we ensure a smooth transition from the construction facility to your permanent home loan — and confirm the rate and structure are optimised.

Construction Loans — Frequently Asked Questions

Unlike a standard home loan that's drawn down in full at settlement, a construction loan is released in stages aligned with the build progress. You'll typically have 5–6 progress payments through construction: deposit, base, frame, lock-up, fixing, and completion. At each stage, the builder submits a claim, the lender verifies progress (often via valuation), and the funds are released. You only pay interest on the amount drawn so far, not the total approved amount.

The standard NSW progressive payment schedule runs through six stages: deposit (5–10%), base or slab stage (10–15%), frame (15–20%), lock-up with walls, roof, doors and windows installed (20–25%), fixing for interior walls, cabinetry and fittings (20%), and completion (10–15%). Each payment is triggered by an invoice from the builder, sometimes verified by an inspection or valuation. Lenders manage payments directly to the builder rather than via the borrower.

The standard package includes signed fixed-price building contract, council-approved plans and specifications, builder's licence and insurance details, Home Building Compensation Fund certificate (where applicable in NSW), itemised cost breakdown, and a valuation report (typically "on-completion" basis). Plus the standard home loan documentation — income evidence, ID, bank statements. We send a personalised checklist so you only collect what's required.

A fixed-price contract locks in the cost of construction with your builder, with allowances for specific items (such as tiles or kitchen finishes) that can be selected from a range. Most lenders require a fixed-price contract for standard construction loans — it gives them certainty on the total project cost. "Cost-plus" contracts (where you pay actual costs plus a margin) are usually only fundable through specialist lenders. Owner-builder structures are a separate category with much more restricted lender appetite.

Most construction loans give 12 months to reach completion, with some lenders extending to 18 or 24 months for larger projects. If the build runs over, an extension can usually be negotiated but may attract additional fees or trigger reassessment. We pre-screen lenders for build timelines that match your project scope.

At practical completion, the loan converts from construction phase to a standard home loan. The interest-only period ends, the loan starts being amortised on principal and interest (or you can choose to continue interest-only for an investment property), and the property is treated like any other security. We review the loan structure at this point to make sure it's set up correctly for the long term.

Yes. Knock-down rebuild loans are a common variant of construction lending. The lender will fund the demolition and new build, typically using the post-construction "on-completion" value as the security. There are timing considerations — you'll need to manage the period where you don't have a habitable property, either through bridging finance, renting, or staying with family. We work through the financing pieces alongside your demolition and build timeline.

A standard construction loan funds a build managed by a licensed builder under a fixed-price contract. An owner-builder loan funds a project where you (the owner) are managing the build directly — sourcing trades, ordering materials, supervising the work. Owner-builder loans are much harder to obtain because the lender doesn't have the certainty of a licensed builder's contract. LVRs are lower (typically 60–70%), pricing is higher, and only a small number of lenders will fund them.

Yes, but only on the amount drawn so far — not on the full approved loan. Most construction loans are interest-only during the build phase, which keeps cash flow manageable while you're potentially also paying rent or another mortgage. Once construction completes, the loan typically converts to principal and interest (or you can extend interest-only on investment property).

Yes, where they're included in the fixed-price contract or covered as additional "soft costs". The lender will typically fund items integral to the build (driveway, basic landscaping, fencing, retaining walls) if they're listed in the contract and quantified in the cost breakdown. Premium landscaping, pools, and outdoor structures may need separate financing or owner contribution. Plan these costs into the initial loan application rather than coming back later.