Construction Loans
What is a Construction Loan?
A construction loan is a type of financing that funds the building or major renovation of a property.
Unlike standard home loans, construction loans release funds in stages aligned with the completion of specific building milestones.
This approach ensures that you only pay interest on the funds you use, making it a cost-effective solution for your project.
How Does a Construction Loan Work?
A construction loan is a specialised home loan designed to fund the building of a new home or major renovation. Unlike a traditional home loan, funds are released in stages—called progress payments—as each phase of the construction is completed.
During the build, you typically only pay interest on the amount drawn down, helping to manage cash flow. Once construction is complete, the loan often converts to a standard home loan. At Natloans, we work closely with builders, lenders and you to ensure a smooth process from approval to completion.”
Approval Process
Progressive Payments
Funds are released in stages, typically matching the five construction phases:
- Foundation
- Frame
- Lockup
- Fit-out
- Completion
Interest Payments
Loan Conversion
Step By Step Guide to a Hassle-Free Construction Loans
1. Planning Your Project
Prepare detailed building plans and a cost estimate from a licensed builder. Ensure all permits and approvals are ready.
2. Speak to a Natloans
3. Pre-Approval
4. Final Approval & Valuation
5. Drawdown Process
6. Completion & Loan Conversion
Why Choose Natloans for Construction Loans?
- Personalised Solutions: We tailor loan options to match your budget and goals.
- Expert Guidance: Our team handles the complexity so you can focus on your project.
- Access to Leading Lenders: We compare multiple lenders to secure the most competitive rates.
- Seamless Process: From pre-approval to drawdown, we make the entire process hassle-free.
Construction loans for Multi-Unit Developments
Why Multi-Unit Developments?
Developing multiple units on a single property offers several advantages:
- Maximise Land Use: Optimise your property’s potential by accommodating more dwellings.
- Increase Rental Income: Generate multiple income streams from tenants.
- Enhanced Property Value: Multiply your investment with higher overall property value.
- Flexibility: Sell individual units or retain them for long-term capital growth.
Financing Multi-Unit Developments
When developing multiple dwellings, securing the right finance is critical. Multi-unit development loans, like construction loans, provide progressive payments aligned with building milestones, but they are specifically designed for projects involving 2-4 units.
At Natloans, we:
- Help you navigate lending requirements unique to multi-unit developments.
- Compare loan options to secure the most competitive interest rates.
- Work with you to structure the loan based on your goals, whether that’s retaining the units, selling them, or a combination of both.
Step-by-Step Guide to Building Multi-Unit Developments
1. Property Assessment & Feasibility
- Determine if the land is suitable for multi-unit development.
- Engage a town planner or architect to ensure compliance with local zoning laws and building codes.
2. Speak to a Natloans Specialist
- Discuss your goals and financial capacity with our team.
- We’ll connect you with the best lenders for your development needs.
3. Development Planning
- Finalise building plans, secure permits, and hire a licensed builder.
- Prepare a detailed cost estimate and project timeline.
4. Loan Pre-Approval
- Submit your financial details and development plans for pre-approval.
5. Construction Phase
- Draw funds progressively as each building milestone is completed.
- Submit progress invoices for lender verification before each payment release.
6. Completion & Strategy
- Once the project is complete, decide whether to sell, lease, or a mix of both.
- Natloans can help you explore refinancing options or additional funding for future developments.
Why Choose Natloans for Construction Loans and Multi-Unit Developments?
- Specialist Expertise: We understand the complexities of financing construction loans and multi-unit projects.
- Wide Lender Network: Access competitive rates and terms from Australia’s leading lenders.
- Tailored Solutions: Our experts work to structure loans based on your unique investment goals.
- End-to-End Support: From initial planning to project completion, we’re with you every step of the way, and can liaise with your other project specialists such as architects and builders.
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Lenders Panel
Frequently Asked Questions
Construction Loans
How much deposit do I need for a construction loan?
Most lenders require a deposit of 20%, but some may accept less with lenders mortgage insurance (LMI).
Can I use a construction loan for renovations?
Yes! Construction loans can fund renovations if they meet certain criteria, such as being structural or involving significant changes.
What documents do I need to apply?
You’ll need building plans, a fixed-price building contract, proof of income, and any permits or approvals.
What happens if my construction project goes over budget?
You’ll need to fund the extra costs yourself, so it’s important to budget carefully and include a contingency fund.
Do I pay interest during construction?
Multi-Unit Developments
How much deposit do I need for a multi-unit development loan?
Can I subdivide and sell the units separately?
Do I need a fixed-price building contract?
Yes, most lenders require a fixed-price contract to mitigate risk.
However, if you have strong serviceability and equity in other property, you may be able to secure a loan sizeable enough to complete the project without a formal construction loan.
Are multi-unit development loans different from standard construction loans?
What happens if the project timeline extends?
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