Building your dream home is an exciting journey, but understanding construction loan structures can feel overwhelming. As a Queensland public sector employee, you have unique advantages when applying for a loan, and knowing how construction loans work will help you make informed decisions.
What Makes Construction Loans Different
Unlike traditional home loans, construction loans operate on a progressive drawdown system. This means you only pay interest on the amount drawn down at each stage of your build. Rather than receiving the full loan amount upfront, funds are released in instalments as construction progresses through various stages of the project.
As a Finance & Mortgage Broker, we can access Construction Loan options from banks and lenders across Australia, helping you compare interest rate options and find a suitable loan amount for your project.
Understanding Progressive Payment Schedules
Construction loans follow a Progressive Payment Schedule that aligns with construction milestones. Typically, payments are made at these stages:
• Land purchase or deposit
• Foundation and slab completion
• Frame construction
• Roof and lock-up stage
• Fixing stage (plumbing, electrical, internal work)
• Practical completion
Your registered builder will coordinate with plumbers, electricians, and other specialists to ensure each stage meets requirements before progress payments are released. This protects both you and the lender throughout the building process.
Interest-Only Repayment Benefits
During construction, most lenders offer interest-only repayment options. This means you'll only pay interest on funds already drawn down, keeping your repayments manageable while your home is being built. This structure is particularly helpful for public sector employees who may be managing both rent and construction loan payments simultaneously.
The Application Process Explained
Our streamlined application process considers your stable public sector employment as a significant advantage. Lenders typically require:
• Council plans and permits
• Fixed price contracts with your builder
• 'As if complete' valuation of the finished property
• Evidence of your deposit (usually 20% of total project cost)
Some lenders may charge a Progressive Drawing Fee for each payment release, so it's important to factor these costs into your budget.
Different Construction Loan Structures
New Build Construction Loans
Ideal for building on suitable land you already own or are purchasing. You'll need to ensure council restrictions and council regulations allow for your planned construction. Most lenders require you to commence building within a set period from the Disclosure Date.
House & Land Packages
Many lenders offer specific loan structures for house & land packages, which can streamline the approval process since both elements are typically pre-approved by councils.
Major Home Renovations
For significant renovations, construction loan structures can provide the progressive funding you need. Whether you're planning to demolish existing property for a new build or undertaking major improvements, this structure ensures funds are available as work progresses.
Buying Off the Plan
Purchasing off the plan requires specific loan structures that account for the staged payment process and potential changes in property values during construction.
Planning Your Construction Project
Before applying, make a plan that includes:
• Identifying your ideal location and price range
• Obtaining necessary development application approvals
• Understanding what's included in your contract versus Out of Contract Items not included
• Budgeting for additional payments beyond the base contract
Home improvement loan options may also be suitable if you're planning smaller-scale construction projects.
Making the Right Choice
Construction loan structures vary significantly between lenders, and what works for one borrower may not suit another. As Queensland public sector employees, you have access to certain lender preferences and potentially better interest rate options.
Working with experienced mortgage brokers ensures you understand all available options and choose the structure that aligns with your financial situation and building timeline.
Call one of our team or book an appointment at a time that works for you to discuss which construction loan structure would work for your building project.
