Construction and renovation loans
Building something new. Or making something great even better.
Whether you're building your first home from the ground up, knocking down and starting fresh, or funding a renovation on a property you already own, construction and renovation finance works differently to a standard home loan. We'll explain how, show you how lenders differ on construction, and handle the lending side so you can focus on the exciting part.
A construction loan is not like a regular home loan. Here is what makes it different.
With a standard home loan, the lender releases the full amount at settlement and you start repaying it straight away. A construction loan works in stages instead. Rather than handing over the full amount upfront, the lender releases funds progressively as your build hits key milestones. This is called a progress draw.
Each progress draw is paid directly to your builder when they complete a stage of the build. The typical stages are the slab (foundation), the frame, lock-up (roof and walls), fit-out (internal fixtures), and practical completion (the finished build). The exact stages and amounts are agreed upfront in your building contract.
The big difference for your cash flow is that during the construction period you only pay interest on the amount that has been drawn down so far, not on the full loan. So early in the build when only the slab stage has been paid, you are only paying interest on that portion. This keeps your repayments lower during the build and increases as each stage is completed.
Once your build is finished and the final draw has been made, the loan converts automatically to a standard principal and interest home loan. From that point it works exactly like any other mortgage.
The typical progress draw stages
• Slab or base stage (the foundation is poured)
• Frame stage (the structural frame is up)
• Lock-up stage (roof, external walls, windows and doors are in place)
• Fit-out or fixing stage (internal fixtures, fittings and plumbing are installed)
• Practical completion (the build is finished and handed over to you)
We help with three types of builds and renovations.
First home buyers building their first home
Building your first home is one of the most exciting things you can do, and one of the most financially complex. Between choosing a builder, understanding your contract, navigating the progress draw process, and working out which government grants you qualify for, there is a lot to get your head around. We take it step by step with you so nothing gets missed.
Knockdown and rebuild
Already own the land but the existing home has seen better days? A knockdown and rebuild lets you start fresh with a brand new home on a block you already own or are buying. The lending covers both the demolition of the old structure and the construction of the new one, and we will help you structure it correctly from the start.
Building on land you already own
If you already own land and are ready to build, we can help you access a construction loan using that land as security. This is often a smoother process than buying land and building simultaneously, and it opens up some lenders and structures that are not available when land and construction are combined.
We focus on straightforward residential builds. If your project is highly complex or unusual, we will tell you honestly and refer you to a specialist who is better placed to help. But for the three scenarios above, we have you covered.
Renovation finance because sometimes the best property is the one you already have.
Not every property improvement needs a construction loan. Depending on the size and scope of your renovation, there may be a simpler and cheaper way to fund it. What's available to you comes down to how much equity you have, what the renovation will cost, and how your current lending is set up.
The five ways to fund a renovation
Equity release through refinancing
If your property has grown in value since you bought it, you may have built up equity you can access. Refinancing to a new loan at a higher amount lets you pull out that equity as cash to fund your renovation. This is one of the most common approaches for larger projects.
1
Line of credit
A line of credit sits alongside your existing home loan and lets you draw funds as you need them up to an approved limit. It is flexible, which suits renovations where costs can be hard to pin down exactly upfront. You only pay interest on what you draw.
2
Construction loan for major structural work
For large-scale structural renovations like extensions, additions, or full internal rebuilds, a construction loan is usually what's used. The progress draw structure suits projects where payments to builders happen in stages as work is completed.
3
Personal loan for smaller cosmetic renovations
For smaller cosmetic projects like a kitchen update, a bathroom refresh, or landscaping, a personal loan can be a straightforward option. It is unsecured (meaning your property is not used as security), faster to arrange, and suited to projects in the range of a few thousand to around fifty thousand dollars.
4
Using existing equity without refinancing
If you have a redraw facility on your existing loan, you may be able to access funds from there without needing a new loan at all. This is the simplest option for clients who have been consistently overpaying their mortgage and have built up a buffer they can draw on.
5
Building new? There may be more government support available than you think.
New builds often attract more generous government support than established properties. Depending on your situation and the state you are building in, you may be eligible for some or all of the following:
First Home Owner Grant
The First Home Owner Grant is a one-off cash payment from your state government for eligible first home buyers. In most Australian states, the grant is higher for new builds than for established homes. The amount and eligibility criteria vary significantly by state, so it is worth checking exactly what applies to your situation.
5% Deposit Scheme
The Australian Government 5% Deposit Scheme lets eligible first home buyers build a new home with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). The government guarantees the gap between your deposit and the standard 20% threshold, which can save eligible buyers a meaningful upfront cost.
Stamp duty concessions on new builds
Many Australian states offer stamp duty concessions or full exemptions for new builds, particularly for first home buyers. The rules vary considerably between states, and in some cases new builds attract no stamp duty at all for eligible buyers. This can represent a significant saving on your total upfront costs.
Eligibility for each of these schemes depends on your individual circumstances, the state you are building in, and the value of the build. We will walk you through exactly which ones you may qualify for.
Here is exactly what we help you with.
• Understanding how a construction loan works and how the progress draw process operates
• Land and construction packages, buying land and building in one combined loan
• Knockdown and rebuild loans, financing both the demolition and the new build
• Building on land you already own, using existing equity as part of the solution
• Renovation finance across equity release, refinancing, line of credit, construction loan, or personal loan depending on your project
• Navigating the First Home Owner Grant, the New Home Guarantee, and stamp duty concessions for new builds in your state
• Comparing lenders, because not all lenders offer construction loans and those that do have very different policies on builder approval, drawdown schedules, and interest-only periods during construction
• Reviewing your building contract alongside your loan structure to make sure everything lines up before you sign anything
This is for you if you are a first home buyer building your first home, a homeowner planning a knockdown and rebuild, someone building on land you already own, or an owner or investor looking to fund a renovation using your existing equity.
Ready to talk through your build or renovation?
Book a 30 minute discovery call. We will look at your project, walk you through the finance options that suit your situation, and give you a clear picture of what is possible. No jargon, no pressure.
Or send us a message and we will get back to you
Privacy Consent Statement
By submitting this form, you acknowledge that Elate Lending will collect, use and disclose your personal information in accordance with its Privacy Policy and consent to being contacted regarding your enquiry.