Construction loans work differently to standard home loans. Funds are released in stages as your build progresses, and you only pay interest on what has been drawn down. ADA Lending helps first home buyers, owner-occupiers, and investors across the Sunshine Coast get the right loan structure before the first slab goes down.
Client Experiences
Trusted by homeowners, investors, and business owners across Australia.
CONSTRUCTION LENDING
Building a Home Requires a Different Kind of Loan
Building a home is a completely different financial exercise to buying an established property. The loan works differently, the approval process demands more documentation, and funds are released in stages tied to your build progress rather than handed over at settlement. Get the lending wrong and it can delay your build, blow your budget, or leave you exposed when the builder sends a progress claim your lender is not ready for.
ADA Financial Services works with first home buyers, owner-occupiers, and property investors across the Sunshine Coast who are planning a new build. We get the right loan in place, manage the drawdown process with you, and make sure nothing falls through the cracks between approval and handover.
This page is general information only. Speak to a licensed broker for advice tailored to your situation.
CONSTRUCTION LOAN
What a construction loan is
A construction loan releases funds progressively as your build hits specific milestones, rather than as a single lump sum. You only pay interest on what has been drawn down, which keeps repayments manageable during construction. Once practical completion is reached and an occupancy certificate is issued, the loan converts to a standard principal and interest home loan.
Funds are released in stages, not as a lump sum at settlement
Interest is charged only on the drawn amount, not the full approved loan
Repayments during construction are typically interest-only
An independent inspector verifies each stage before the next drawdown is released
All payments go directly from the lender to your builder, not through your account
Who We Work With
Who We Help With Construction Lending
Construction lending covers more scenarios than most people realise, and the right loan structure depends heavily on the type of build and contract involved. We regularly help:
- First home buyers building a new home to access grants and duty concessions available on new construction
- Buyers purchasing a house and land package through a developer, where the land and build contracts are handled separately
- Owner-occupiers doing a knockdown and rebuild on an existing block, including managing the transition from their current home loan
- Property investors building a new rental property, where loan structure and tax treatment differ from owner-occupied construction
- Buyers entering an off-the-plan contract for a house or townhouse, where drawdown timing is set by the developer’s build schedule
- People undertaking a substantial renovation or extension that requires staged funding rather than a single lump sum
Each scenario involves different documentation and lender requirements, so understanding which category you fall into early on helps avoid delays later.
DRAWDOWN STAGES
The Five Progress Drawdown Stages
Your build is funded across five stages. Each must be verified by a lender-appointed inspector before the next payment is released. The percentages below reflect standard lender policies and vary between lenders.
- Slab — Foundation laid, underground plumbing in place. Typical release: 15 to 20%
- Frame — Structural walls and roof trusses erected. Typical release: ~20%
- Lock-up — External walls, windows, doors, roofing completed. Heaviest lender scrutiny. Typical release: ~20%
- Fit-out — Cabinetry, tiling, plumbing and electrical rough-ins. Typical release: ~30%
- Practical completion — Final finishes, site clean-up, occupancy certificate issued. Typical release: ~10%
For eligible Queensland first home buyers using a construction loan, the First Home Owner Grant is typically paid at the slab stage, which is the first drawdown. This can make a meaningful difference to your cash position early in the build.
DEPOSIT REQUIREMENTS
Deposit requirements
Construction loans carry slightly different deposit requirements to standard home loans, because the property is an incomplete asset until the build is finished.
Most lenders require a minimum 20 percent deposit across the combined land and build cost to avoid LMI
Some lenders will consider 10 percent with LMI applied, though the cost needs to be factored into your total budget
If you own the land outright or carry significant equity in it, the land can serve as security in place of a cash deposit
Many lenders also require a contingency buffer of 5 to 10 percent of the build cost within the approved loan amount
We run the deposit and equity calculation with you upfront so you know exactly what you need before engaging a builder.
GOVERNMENT GRANTS
Government Grants for New Builds in Queensland
Building a new home in Queensland may make you eligible for meaningful government support. Grant amounts, eligibility rules, and property thresholds change periodically, so we always verify what you qualify for against the latest guidance from the Queensland Revenue Office and Housing Australia before lodging any application.
These schemes can often be combined where eligibility is met. We map out which ones apply to your situation and coordinate the applications.
Government Grants for New Builds in Queensland
New builds in Queensland may qualify for government support. We verify what you qualify for against current Queensland Revenue Office and Housing Australia guidance before any application.
First Home Owner Grant (FHOG)
A one-off tax-free payment for eligible first home buyers building or purchasing new. The amount depends on your contract date. For construction loans, it is generally paid at slab stage. Combined land and build value must be under $750,000.
Transfer Duty Exemption
Eligible first home buyers purchasing vacant land to build their first home may qualify for a full transfer duty exemption. Thresholds vary, so confirm with your conveyancer before signing.
5% Deposit Scheme
Eligible first home buyers can build with a deposit as low as 5 percent and no LMI. Property price caps apply by region.
LENDER REQUIREMENTS
What Lenders Need to Approve a Construction Loan
Construction loan approvals require more documentation than a standard home loan. Lenders assess both the builder and the contract, not just your financials.
Most lenders will not proceed without the full documentation package in place. Getting these sorted early avoids delays once your application is submitted.
01
Fixed-Price Building Contract
Signed with a licensed, registered builder. Cost-plus arrangements are generally not accepted by major banks.
02
Approved Plans and Permits
Council-approved plans and building permits
03
Builder Insurance
Builder's public liability insurance and home warranty insurance
04
On-Completion Valuation
A quantity surveyor or valuer's on-completion property assessment
05
Land Confirmation
Land ownership confirmation or a signed land purchase contract
Our Process
How We Work Through a Construction Loan With You
Getting a construction loan in place runs across four stages, from initial assessment through to loan conversion at handover. Here is how we work through it with you:
01
Assessment and Lender Selection
We review your financial position, land situation, and build plans before a builder is engaged. We then compare lenders on rate, drawdown speed, and inspection policy.
02
Pre-Approval and Formal Approval
Pre-approval is submitted using your financials and build contract. Once contracts are signed, the lender orders a valuation based on approved plans and on-completion value.
03
Drawdown Management
We coordinate drawdown requests and lender inspections at each build stage. This keeps things moving and avoids delays that affect your builder and timeline.
04
Loan Conversion
At practical completion, the loan converts to a standard home loan. We review the converted structure with you at that point to make sure it still fits your situation.
ADDITIONAL COSTS
Costs to Budget for Beyond the Loan
A construction loan covers land and build costs, but there are expenses outside the loan that catch many buyers off guard. These costs are not included in your building contract and need to be budgeted separately before you commit. The total can add anywhere from a few thousand to tens of thousands depending on your block, council, and builder. Knowing what is coming means you are not scrambling for funds mid-build.
Pre-Build Fees
Council application fees, building permits, soil testing, surveying, and engineering reports are all required before a slab is poured and none are covered by your loan
Lender and Contract Costs
Lender inspection fees are charged at each drawdown stage, and any builder variations outside the original fixed-price contract come out of your pocket directly
Site and Connection Costs
Utility connections for water, power, gas, and NBN are separate charges, and site-specific costs like retaining walls or cut-and-fill work can add significantly depending on the block
Post-Build Finishing
Landscaping, fencing, window furnishings, and appliances are rarely included in a standard building contract and are typically the last costs buyers account for.
Frequently Asked Questions
Common Questions About Construction Loans
How is a construction loan different from a regular home loan?
Funds are released in stages as your build progresses rather than in one lump sum at settlement, and you only pay interest on what has been drawn down. Once the build is complete, the loan converts to a standard principal and interest home loan.
Can I use the Queensland FHOG if I am building a new home?
Yes. Eligible first home buyers building a new home can access the FHOG, which is generally paid at the slab stage (the first drawdown) rather than at settlement. The grant amount depends on your contract date, and the combined land and build value must be under $750,000. We confirm your eligibility before any application goes in.
Do I need a fixed-price contract to get a construction loan?
Most mainstream lenders require a fixed-price contract with a licensed, registered builder. Cost-plus arrangements are generally not accepted by major banks. Some non-bank lenders have more flexible policies, and we identify which lenders suit your situation.
What happens if my build goes over budget?
Any cost above the approved loan amount needs to be funded from your savings or through a loan increase, which requires a new lender assessment. Building a contingency buffer of 5 to 10 percent into your loan from the start is the most practical way to manage this risk.
What happens when the build is finished?
The loan converts to a standard home loan once an occupancy certificate is issued. We review the converted loan structure with you at that point to confirm it still suits your situation, including rate, features, and repayment type.
How long does a construction loan take to approve?
Construction loans need more paperwork than standard home loans, including a fixed-price contract, council-approved plans, and an on-completion valuation. With everything prepared correctly, formal approval commonly takes a couple of weeks after a signed contract. Complex builds can take longer. We prepare the file fully before submission to reduce avoidable delays.