Can I get a home loan to build my own house?

To build your own property, you’ll usually have to apply for a construction loan, which differs to a regular home loan. Most lenders release the money in instalments, relating to each stage of construction.

Fans of Grand Designs, The Block or House Rules might think building a house from scratch is easy. But a home isn’t built in a day.

If you choose to build your own home, you’ll need what’s called a construction loan. Lenders don’t tend to offer traditional loans to those wanting to build their own properties – the risk involved puts some lenders off entirely.

To begin with, they have to consider the possibility you never finish the project, or that you overspend on construction. Either scenario could lead to you defaulting on your loan repayments.

What is a construction loan?

A construction loan is a loan sought to facilitate building of some kind – be it a house or renovations, knock down or rebuild.

Construction loans, accessible once a buyer has purchased land, enable borrowers to access their loan amount in stages. In other words, lenders structure the loans so you receive a payment only when you reach a new stage of construction.

This means the borrower doesn’t have to make repayments on the full loan until they are ready to move into the house. If your lender has released 60% of the loan, you only make repayments on that 60%.

It also protects the lender as it prevents the borrower from spending the entire loan early on and ending up with nothing to finish the project.

What are the different stages of construction?

Once you’ve found a reputable builder and drawn up plans for your property, you’ll get a building contract which includes the cost, construction terms and a Progress Payment Schedule (PPS) which is a schedule of the payments you’ll need to make to your builder.

Your PPS will typically include 5 or 6 stages of construction, from foundations to framing, fit out and finishes.

How does a construction loan work?

A construction loan aligns with the payment scheme your builder puts in place. At the end of each stage of construction, your builder should give you an invoice. You send this invoice to your lender, and they release the next loan payment for the project. Your builder receives their payment and moves onto the next stage.

Your lender will provide a percentage of your construction loan for each stage, which may look something like this:

Banks and lenders may structure their construction loans slightly differently. Below is an example of a Westpac 5 stage loan.

UNO works with many lenders which offer competitive construction loans, including Bankwest and St George, both of which have dedicated progress payment teams to help with the drawdown process.

Chat to a UNO expert to learn more about construction loans.

What are the steps in the construction process?

The stages of the construction process have been outlined above. There are other things to know before you get started though.

For one, most lenders require that construction commence within 6 months from the Disclosure Date on the home loan contract. Construction may also need to be completed within 24 months.

In addition to your loan application documents, you’ll also need to supply to your lender:

  • A signed and dated building contract
  • Your Progress Payment Schedule
  • Council approved plans for your construction
  • Quotes for any additional work to be funded by the loan

Do you have to put a downpayment on a construction loan?

As with standard home loans, the greater your deposit, the less risk you pose to the lender. Because many people go over budget when building a home, it’s good to save as much as you can before commencing work – and continue to save throughout the process.

How do draws work on a construction loan?

A construction loan aligns with the progress payment scheme your builder puts in place. Each progress payment is called a draw down and interest will be charged on the amount drawn down at the time.

How much interest will I pay on a construction loan?

Unlike standard home loans where you pay interest on the full amount from the start, with a construction loan you only pay interest on what you draw down. So if you draw down $50,000 of a $500,000 loan to begin with, you’ll only pay interest on that $50,000. You’ll pay interest on the rest as the construction continues and you draw it down.


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Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
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February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
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February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
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January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
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January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
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January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
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December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
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December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
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December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
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December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
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December 6, 2023
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November 3, 2023
If you’re looking for a trustworthy, thorough, reliable & knowledgeable Mortgage Broker then you must call Anita Callaghan! I can’t even imagine how stressful this process would’ve been without her. Anita went above and beyond to make sure she answered every question, responded to every text (even on weekends/after hours), and followed up on every detail to ensure we had all the info we needed. Anita is a true people person who is warm, empathetic, kind and supportive. You can tell she loves helping people and loves what she does, which is probably why she’s so good at it! Can’t thank you enough Anita, or recommend you more highly! You’re the best!
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