What is the minimum deposit for construction finance?

Most lenders require a developer equity contribution of 20%–35% of the total project cost. This can be cash, equity in the site (if already owned), or equity in other property. The exact requirement depends on the project's LVR, the lender's policy, and the developer's experience.

Can I get construction finance for my first development?

Yes, though the terms may be tighter. First-time developers typically face lower LVRs, higher rates, and stronger requirements around builder selection and pre-sales. Having a strong site, a reputable builder, and a realistic feasibility will improve your chances. Some developers bring in an experienced partner or project manager to strengthen the application.

How are draw-downs approved during construction?

At each milestone, the builder submits a progress claim. The lender arranges an independent quantity surveyor or building assessor to inspect the site and verify the work matches the claim. Once the assessor confirms the stage is complete, the lender releases the corresponding portion of the facility. This process typically takes 3–7 business days per draw-down.

What happens if the build goes over budget?

If costs exceed the original contract, the additional amount must be funded from your own equity or a variation to the facility (if the LVR allows). This is why a contingency allowance of 5%–10% is essential and why fixed-price contracts are strongly preferred by lenders.

Can I use construction finance for a renovation or extension?

Yes. Construction finance can cover major renovations, extensions, and knockdown-rebuilds. The same staged draw-down process applies. For smaller renovations (under $200,000), a second mortgage or equity release loan may be simpler and faster than a full construction facility.

What is the difference between construction finance and a development loan?

Construction finance specifically funds the building phase. A development loan is a broader term that can cover site acquisition, pre-construction costs, construction, and sometimes marketing and selling costs. In practice, many private lenders offer development loans that encompass the full project lifecycle.

Construction Funding in Australia: How to Finance Building Projects From Site to Completion

Jan 29
1 min read

Updated: Apr 16

Construction Funding in Australia: How to Finance Building Projects From Site to Completion

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