How do construction loans work?

Gearing up for a big build or renovation? Construction loans let you draw down the loan in stages as the building or renovation progresses. This helps to monitor the build and ensure you’re only paying for work that’s been completed.

What’s more, you don’t have to make repayments on your full loan amount until your home is completed. This means you can have some extra money handy during the build.

Here’s how construction loans work

The builder issues an invoice at each stage

There are usually five stages of construction. These are typically known as slab, frame, lock-up, fixing and completion. As each stage is completed, your builder will issue an invoice.

We make progress payments

With a Bankwest construction loan, you simply have to pass the invoices to us and authorise us to make the progress payments from your home loan to your builder. Valuations are done at certain stages.

You make repayments

As each progress payment is made, you’ll only need to pay the interest on your loan until construction is finished. Making lower repayments during the construction period could mean you have some spare cash up your sleeve for things like expenses you didn’t see coming or rent to stay somewhere else while you’re building.

When construction is complete, you can start making repayments on both the principal (loan amount) and interest, or you can continue to pay interest only for a period of up to five years.

Our Home Finance Managers can help you use one of our variable rate loans as a construction loan.

Find a home loan to suit you

Browse our range of home loans.

Need help choosing a loan?

Get in touch with one of our Home Finance Managers, and they'll respond within one business day.

Things you should know 

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.