Construction & House-and-Land Loans — Build Your Dream Home
Build your dream home with the right finance structure. We guide you through progress payments, interest capitalisation, and lender selection so you can focus on the exciting part — watching your home take shape.
What Is a Construction Loan?
Unlike a standard home loan, a construction loan is released in stages as each phase of the build is completed
Your builder invoices at each milestone, the lender inspects the work, and funds are released. You only pay interest on the amount drawn down so far — not the full loan. Here are the five standard construction stages:
Slab (Base Stage)
The concrete slab or footings are poured. This is usually 10–15% of the total build cost. The lender releases the first draw-down once the slab is inspected and approved.
Frame Stage
The structural frame (walls and roof trusses) is erected. Typically 15–20% of the contract. The building starts to take shape at this point.
Lock-Up Stage
External walls, roofing, windows, and doors are installed — the house is now weatherproof and lockable. This stage is usually 20–25% of the total cost.
Fixing Stage
Internal fit-out begins: plasterboard, cabinetry, benchtops, plumbing fixtures, electrical wiring, and tiling. Typically 20–25% of the build cost.
Completion (Practical Completion)
Final finishes, painting, landscaping, driveways, and cleaning. The final inspection is done, and the remaining balance (typically 10–15%) is released. Your construction loan then converts to a standard home loan.
How Jain Home Loans Helps
Building a home is complex. We make the finance part straightforward.
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Compare lenders offering competitive construction rates
We compare lenders offering competitive construction rates, ensuring you get the best deal with features like interest capitalisation and smooth draw-down processes.
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Explain draw-down schedules and progress payments
We explain draw-down schedules and progress payments so you understand exactly when funds are released to your builder at each construction stage.
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Ensure builder compliance before each payment release
We ensure builder compliance before each payment release, verifying that work has been completed to standard before the lender disburses funds.
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Coordinate valuations and inspections between stages
We coordinate valuations and inspections between stages, ensuring each milestone is verified before the next draw-down is released so the build stays on track.
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Transition your loan to a standard mortgage after completion
Once construction is finished, we transition your loan to a standard mortgage with competitive rates, so you move seamlessly from build phase to regular repayments.
House-and-Land Packages
A popular option for first home buyers and families who want a brand-new home without the complexity of managing land and builder separately
One Combined Approval
One combined approval covering both land + build. Some lenders offer a single loan that covers both, making the process simpler and reducing upfront costs.
Lower Interest Costs
Lower interest costs during the early months. With progressive draw-downs, you only pay interest on the amount disbursed so far, not the full loan amount, keeping your costs down while the build progresses.
Simpler Process
Simpler valuation and settlement process. With both land and build under one package, the valuation and settlement are streamlined, reducing paperwork and making the journey to your new home smoother.
Using Equity to Build
If you already own a property — whether it is your home or an investment — the equity you have built up can serve as your deposit for a construction loan. This means you may not need to save a separate deposit to start building.
We assess how much usable equity you have (typically the value above 80% LVR on your existing property) and structure the finance so the equity release and construction loan work together seamlessly.
Example: If your current home is worth $650,000 and you owe $350,000, you have approximately $170,000 in usable equity (up to 80% LVR). That equity could fund your land purchase or serve as the deposit for a house-and-land package — without touching your savings.
Interest Capitalisation — Protecting Your Cash Flow
During the construction period, some lenders allow you to capitalise the interest rather than paying it out of pocket each month
Interest capitalisation means the interest charges during the build are added to your loan balance instead of being paid monthly. This is especially helpful in these situations:
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Paying rent while building
If you are renting while your new home is being constructed, capitalising interest means you are not paying rent and mortgage interest at the same time.
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Servicing an existing mortgage
If you already have a home loan on another property, capitalisation avoids doubling your monthly obligations during the construction phase.
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Single-income households during the build
If one partner has reduced work hours during the build period, capitalisation eases the cash-flow pressure until you are back to full income.
Note: Capitalised interest increases your total loan balance. Once the build is complete and the loan converts to standard repayments, you will be repaying a slightly larger amount. We model this for you upfront so you know the total cost.
Key Construction Loan Features
What to expect from a typical construction loan
| Feature | Details |
|---|---|
| Interest-only during build | You only pay interest on the amount drawn down so far, not the full loan amount. Repayments increase gradually as each stage is funded. |
| Interest capitalisation | Some lenders allow interest to be added to the loan balance during construction, so you have no out-of-pocket interest costs until the build is complete. |
| Fixed or variable rate | Most construction loans start on a variable rate during the build, with the option to fix once the loan converts to a standard home loan at completion. |
| Progressive draw-downs | Funds are released in stages (slab, frame, lock-up, fixing, completion) after each inspection, ensuring your builder is paid as work is verified. |
| Offset & redraw | Some lenders offer offset accounts or redraw facilities during the construction phase, giving you flexibility to manage surplus cash. |
| Auto-conversion at completion | Once the build is finished, the loan automatically converts to a standard principal-and-interest home loan at the agreed rate and term. |
Example Scenario
Building in Riverlea Park: The Sharma Family
The Sharma family has found a house-and-land package in Riverlea Park, one of Adelaide's newest master-planned communities. Land settled June 2025. They are currently renting in Prospect and want to build their first home without stretching their budget during the construction period. Construction loan approved with five progress draw-downs.
Their Situation
The Build
With interest capitalisation during the 8-month build, the Sharmas avoid paying rent and construction loan interest simultaneously. Stamp duty is calculated on the land component only, saving them thousands. Once complete, their loan converts to a standard P&I home loan at a competitive rate.
* Figures are illustrative only. Actual amounts depend on lender policies, valuations, and individual circumstances.
Construction Loan FAQs
Quick answers to the questions we hear most often about building finance
Ready to Start Your Build?
Let us help you find the right construction loan — with the features, rate, and structure that fits your build. No pressure, no jargon, just honest advice.
The information on this page is general in nature and does not constitute financial advice. Construction loan terms, features, and availability vary between lenders. We recommend seeking independent financial advice tailored to your personal circumstances before making any decisions about construction finance.