Your complete guide to financing a new home build in Australia
Written By Annelyse Stead | Australian Home Building & Renovation Contract Specialist | M. Construction Law | B.Construction ManagementMost people building their first home assume the hard part is choosing tiles and floor plans.
They're wrong.
The real challenge? Getting your finance and building contract to work together—not against each other. Miss this, and you could face blown budgets, construction delays, or worse: a home you can't afford to finish.
This week, I sat down with Charlotte from CC Mortgages to map out everything you need to know about financing your build. What became clear is that success isn't about getting the cheapest rate—it's about understanding how construction lending works and ensuring your building contract supports it every step of the way.
Here's your step-by-step roadmap from pre-approval to handover.
1. Start here: work out what you can actually afford
Before you fall in love with display homes or start sketching dream kitchens, you need to know your numbers.
Understanding your borrowing capacity
The first question everyone asks: "How much can I borrow?"
Your borrowing capacity is determined by two things: what the bank will lend you based on your income and expenses, and how much deposit you have saved. But here's what most first-time builders don't realise—banks don't just look at the land price. They do what's called an "as if complete" valuation.
This means they'll review your plans and building contract, look at comparable sales data, and value your property as if it's already built. They'll break this down into land value and the value added by improvements (your new home).
Pro tip: There are strategic ways to maximise your budget through smart land purchasing arrangements, accurate valuations, and government grants for first-time builders. This is where working with an experienced mortgage broker pays off.
How construction loans actually work
Construction loans aren't like standard home loans. Here's the key difference: your loan is drawn down in stages as your build progresses, not all at once.
During construction, you'll typically make interest-only repayments on the amount that's been drawn down so far. Once your build is complete, the loan converts to principal and interest repayments.
This structure means your repayments will gradually increase throughout the build as more of the loan is released to pay your builder.
Build your support team now
This is the time to assemble your advisory team:
Mortgage broker: Helps you maximise your borrowing capacity and find the right loan structure
Building contract advisor: Ensures your building contract aligns with your lending requirements (that's where I come in!)
Conveyancer: Handles the legal side of land purchase and contract settlement
These three professionals working together will save you from costly mistakes down the track.
2. Before you sign with a builder: get your contract right
I know the fun part is choosing finishes and layouts. But trust me—your building contract and finance documents deserve just as much attention.
Getting these right now will prevent headaches (and budget blowouts) during your build.
Understand how progress payments work
Here's what happens: as soon as your builder submits the first progress claim, your mortgage repayments begin. These are usually interest-only payments that increase each time another progress claim is paid.
The payment schedule in your building contract is critical. You need to ensure:
Payments match actual construction progress (no front-loading)
The schedule meets your bank's requirements
Stages are clearly defined with specific milestones
A building contract advisor can review your payment schedule to ensure it aligns with industry standards and protects your interests.
Prepare for the realities of building
Lender expectations: Most banks have conditions around construction timeframes. Make sure your building contract aligns with when works must start and finish.
Delays: They happen. Your contract should include liquidated damages—compensation paid to you by the builder for delays they cause. Also factor delay costs into your budget (extended rent, storage fees, additional interest).
Variations: Even the most careful planning results in changes. Industry standard is to budget 10% of your build price for variations. Discuss with your lender whether these can be covered within your loan or if you need cash reserves.
Hidden costs that catch people out
Beyond your build price, budget for:
Site establishment and preparation costs
Utility connection fees (water, electricity, gas, NBN)
Council permits and approvals
Architectural and engineering design fees
Soil testing and surveys
Landscaping and driveways
These can add $20,000-$50,000+ to your total project cost. Factor them in early to avoid financial stress later.
3. During construction: stay on top of payments and timelines
Notice of commencement
When your builder starts work, they must provide a Notice of Commencement. Keep this document—your bank needs it for their records, and it officially starts the building period clock.
Track any delays from this date. This helps you determine whether the builder has valid reasons for extensions or is simply running late (which may trigger liquidated damages).
Managing progress claims
Progress payments happen at predetermined stages throughout your build. Your bank may require site inspections at key milestones—like when the slab is poured or before releasing the final payment.
Critical step: Before approving each payment, verify the work has actually been completed to the standard specified in your contract. Don't just take the builder's word for it.
4. Completion: the finish line (and what comes next)
Your loan transitions to principal and interest
Once your Certificate of Occupancy is issued, your construction loan converts from interest-only to principal and interest repayments.
The good news? You're no longer paying rent or temporary accommodation costs. Those funds can now go straight towards your mortgage repayments.
Insurance requirements
You'll need comprehensive home and contents insurance in place before making the final payment. Most lenders require proof of insurance before releasing final funds to your builder.
The practical completion inspection
Your builder will issue a Notice of Practical Completion when they believe the home is finished. This is your opportunity to conduct a thorough inspection.
Create a detailed defects list covering:
Incomplete work
Poor workmanship or finishes
Damage during construction
Items not matching contract specifications
The builder must rectify these defects before you make the final payment. Don't be pressured into paying before defects are fixed—once that final payment is made, your leverage disappears.
What to collect at handover
When receiving your keys, also get:
All keys, remotes, and access codes
Warranties for appliances, fixtures, and systems
User manuals and maintenance guides
Warranties and insurance certificates for building work
As-built plans showing final construction details
The bottom line
"The key to a successful build isn't just having money—it's understanding how construction finance works and ensuring your building contract supports it every step of the way." — Charlotte, CC Mortgages
Building a home is one of the biggest financial commitments you'll make. Get your lending and contract structure right from the start, and you'll save yourself stress, money, and sleepless nights.
I loved putting this guide together with Charlotte from CC Mortgages. We hope it helps you navigate the intersection of finance and building contracts for your dream home.
If you have questions, Charlotte and I are here to help. Charlotte handles the lending side, and I've got the building contract expertise covered.
Ready to get your building contract sorted?
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In just minutes, my Building Contract Health Check gives you complete clarity on your contract terms, payment schedules, and protection clauses.
I dive deep into the details of your building contract and identify solutions for issues before they happen—or help you solve problems that have already emerged.
Whether you're about to sign a contract or already mid-build, I'll show you exactly how to protect your interests and keep your project on track.
Thanks for reading, and catch you in the next post 😊
Annelyse
Construction Management | M. Construction Law
