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Construction Loan FAQ

Here are a number of our most frequently asked questions regarding Construction Loans. There is a full list of Construction Loans offered by Mortgage House at the bottom of the page.


How much time do I have to build my house?

Construction Loans normally allow up to 2 years to complete the construction of the dwelling after the purchase of the land has settled.


How does a construction loan work?


  • The Construction loan allows interest only mortgage repayments for the land portion prior to construction and interest only repayments during the construction process
  • The funds will be paid to your builder in draw downs, after a body of work has been completed, ensuring you only pay interest on the portion of the construction loan you have drawn down rather than on the entire loan amount
  • Upon completion of construction, your construction loan will automatically revert to a standard variable rate home loan with repayments based on both principal and interest
  • You have up to 24 months to complete construction and draw down all funds from the loan.
  • The total construction loan may be split between two accounts after construction is complete to assist in managing both personal and investment debt.

What is draw down?

Your construction project is normally divided into 5 stages from slab down to lock up stage. A draw down is a payment made to the builder after each predetermined stage of construction is complete. This will be outlined in your contract with the builder.


The advantage of having a draw down payment is that you will only be charged interest on the amount that you have drawn down (paid out to the builder), rather than the full loan amount.


How do I pay the contractors?

Mortgage House will arrange to pay the builder directly, upon confirmation that one of the five predetermined stages of construction (such as slab down) has been completed.


What happens if my construction costs increase?

As part of your agreement with the builder and a term of accepting a Construction Loan, you are required to get a Fixed Price Contract with your builder; therefore any changes in construction will need to be borne by the builder.


What if my builder goes bust?

Builders are required to have insurance. You will be able to appoint another builder subject to your lender's approval to complete the work. In normal circumstances, the insurance company normally pays any difference in costs.


Can I get an Interest Only construction loan?

You are able to make Interest Only mortgage repayments during the construction process (up to 24 months). After this time, your loan will revert to a standard variable rate home loan with principal and interest repayments.


Can I get a Construction Loan if I am Self Employed?

Yes, we have a number of Low Doc Construction Loans available. See bottom of this page for a full list.


Can I use a Construction Loan to make major renovations to my house?

Yes, you can use a Construction Loan to make major renovations to your home or investment property. You will require a fixed price contract from a builder.


Can I get a construction loan as an Owner-builder?

In some circumstances we can assist you with a Construction Loan if you an owner builder. To see if you qualify, please contact our office on 136 HOUSE (136 468).


What is the maximum percentage of construction cost I can borrow?

Mortgage House has construction loans allow you to borrow up to 95% of the value of the property plus additional funds to cover the total cost of Lender's Mortgage Insurance, if required.


What Construction Loans do Mortgage House offer?

Click on the links below for more information on our Construction Loans.

Meet With a Mortgage House Lending Specialist

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Where to go from here?
Mortgage House - Mortgage of the Year Awards 2011Best Introductory Loan – Non Bank
Mortgage House Australia Home Loans