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A construction loan pays your builder in stages as the work is completed, and you pay interest only on the amount drawn so far. Most lenders let you pay interest only during the build and switch to principal and interest when the home is finished.
This page explains the stages and progress payments, what you need to apply, how first home buyer grants and the 5% Deposit Scheme apply to new builds, and which lenders we review offer construction loans.
By Better Rate Mate Editorial Team · Last reviewed
If you are buying land separately, you usually settle the land first, then the lender approves a construction loan against your building contract. When each stage is complete, the builder invoices you, the lender may inspect or value the work, and then it pays the builder. Bankwest describes its construction loan as a variable loan where money is released in progress payments so you only pay for completed work, with interest-only repayments until construction finishes and all progress payments are made.
Building contracts set out the stages and how much is paid at each. In Victoria the law caps the deposit and sets the usual stage percentages; other states have their own rules, so check your state's consumer affairs or building regulator.
| Stage | What's complete | Payment (% of contract price) |
|---|---|---|
| Deposit | Contract signed | Maximum 5% (10% for contracts under $20,000) |
| Base | Depends on floor type, e.g. concrete floor complete, or stumps and piers complete | 10% |
| Frame | Frame complete and approved by a building surveyor | 15% |
| Lock-up | External cladding and roof fixed, flooring laid, external doors and windows fixed | 35% |
| Fixing | Internal cladding, doors, skirting, cabinets, baths, basins and sinks fitted | 25% |
| Completion | Work complete | The balance |
Lenders assess the finished home's value and your ability to repay the full loan, so they need the build details up front.
Most state first home owner grants are for new homes, which makes them relevant to building. For example: Queensland's grant is $30,000 for new homes valued under $750,000, the Northern Territory's HomeGrown Territory Grant is $50,000, and Tasmania's grant is $20,000 for transactions from 1 July 2026 to 30 June 2027. See our first home buyer page for every state.
The 5% Deposit Scheme covers building on vacant land with a building contract: the land and build costs together must be under the price cap, and the loan term can be up to 30 years plus up to 3 years to build, which may include interest-only payments.
Bankwest: construction loans with interest-only during the build; its Complete package has no application, valuation or progress payment fees. ANZ: a construction loan in its range. Westpac: a construction option on its loans. Athena: specialist construction loans. Not all products are available: CommBank's Digi and Simple loans exclude construction (its Standard Variable Rate loan is the usual choice), and Unloan doesn't offer construction loans at all.
The lender pays your builder in stages as each part of the build is completed, and you pay interest only on the amount drawn so far. Many lenders allow interest-only repayments until the home is finished.
Usually deposit, base, frame, lock-up, fixing and completion. In Victoria, a contract to build all stages usually pays 10% at base, 15% at frame, 35% at lock-up and 25% at fixing, with the deposit capped at 5% for contracts of $20,000 or more.
Yes. Buying vacant land with a building contract is eligible if the land and build costs together are under the price cap. The loan can run up to 30 years plus up to 3 years to build.
In most states, yes, if you meet the conditions, because grants are aimed at new homes. Amounts range from $10,000 (NSW, Victoria, WA) to $50,000 in the NT, and SA has no value cap.
Among the lenders we review: Bankwest, ANZ, Westpac, Athena (specialist) and CommBank's Standard Variable Rate loan. Unloan and CommBank's Digi and Simple loans don't.
We don't quote lenders' interest rates: they change daily and with every RBA decision, and we don't have a live rate feed. The averages we quote are the RBA's published figures for the month shown. Always get the lender's key facts sheet, which shows the rate and comparison rate for your loan amount.
