Best Construction Loans & Rates in Australia

  • See the top construction home loan rates, starting from 5.48% p.a. (6.24% p.a. comparison rate^).
Construction home loans
Construction home loans

In our construction home loans guide:

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Best variable rate construction loans compared

The table below shows a selection of the best variable construction loan rates currently available for owner-occupiers. These rates are based on principal and interest repayments and the table is sorted by the lowest interest rate, then the lowest comparison rate.

Regional Australia Bank - Introductory Basic Home Loan Variable

Variable interest rate

5.74% p.a. variable (3-year intro rate)

Comparison rate^

6.23% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

80%

Arab Bank Australia - The Basics Home Loan Variable

Variable interest rate

5.75% p.a. variable (discount of 3.54% off standard variable rate)

Comparison rate^

5.88% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

60%

G&C Mutual Bank - Essential Worker Owner Occupied

Variable interest rate

5.80% p.a. variable

Comparison rate^

5.83%

Features
  • Designed for frontline & essential workers (e.g. healthcare, law enforcement, education)
  • 100% offset account
Maximum loan-to-value ratio (LVR)

95%

Reduce Home Loans - Eco Home Loan Variable

Variable interest rate

5.84% p.a. variable

Comparison rate^

5.89% p.a.

Features
  • Additional repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

80%

Summerland Bank - Eco Home Loan Variable

Variable interest rate

5.84% p.a. variable (special offer)

Comparison rate^

5.89% p.a.

Features
  • Additional repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

60%

Pacific Mortgage Group - Owner Occupied Variable

Variable interest rate

5.89% p.a. variable

Comparison rate^

5.89% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

80-90%

The Mutual Bank - Budget Owner Occupied Variable Home Loan

Variable interest rate

5.89% p.a. variable

Comparison rate^

5.89% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

80%

G&C Mutual Bank - First Home Buyer Loan (Special)

Variable interest rate

5.90% p.a. variable

Comparison rate^

5.93% p.a.

Features
  • 100% offset account
  • Redraw
Maximum loan-to-value ratio (LVR)

95%

Arab Bank Australia - Essentials Home Loan Variable

Variable interest rate

5.90% p.a. variable (discount of 3.49% off standard variable rate)

Comparison rate^

5.94% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

60%

The Mac Credit Union - Owner Occupied Variable

Variable interest rate

5.92% p.a. variable (2-year intro rate)

Comparison rate^

7.57% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

95%

Greater Bank - Great Rate Home Loan Variable

Variable interest rate

5.94% p.a. variable (special offer)

Comparison rate^

5.95% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

80%

Hume Bank - liteBlue Owner Occupied Variable

Variable interest rate

5.94% p.a. variable

Comparison rate^

5.95% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

60%

Tiimely Home - Livein Owner Occupied

Variable interest rate

5.94% p.a. variable

Comparison rate^

5.95% p.a.

Features
  • 100% offset
  • Redraw
Maximum loan-to-value ratio (LVR)

90%

Community First Bank - Basic Home Loan Variable

Variable interest rate

5.94% p.a. variable

Comparison rate^

5.99% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan-to-value ratio (LVR)

95%

The Capricornian - Offset Owner Occupied

Variable interest rate

5.99% p.a. variable

Comparison rate^

5.99% p.a.

Features
  • Offset
  • No ongoing monthly home loan fees
Maximum loan-to-value ratio (LVR)

95%

Variable interest rate Comparison rate^FeaturesMaximum loan-to-value ratio (LVR)

Regional Australia Bank - Introductory Basic Home Loan Variable

5.74% p.a. variable (3-year intro rate)

6.23% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Arab Bank Australia - The Basics Home Loan Variable

5.75% p.a. variable (discount of 3.54% off standard variable rate)

5.88% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

G&C Mutual Bank - Essential Worker Owner Occupied

5.80% p.a. variable

5.83%

  • Designed for frontline & essential workers (e.g. healthcare, law enforcement, education)
  • 100% offset account

95%

Reduce Home Loans - Eco Home Loan Variable

5.84% p.a. variable

5.89% p.a.

  • Additional repayments allowed
  • Redraw facility

80%

Summerland Bank - Eco Home Loan Variable

5.84% p.a. variable (special offer)

5.89% p.a.

  • Additional repayments allowed
  • Redraw facility

60%

Pacific Mortgage Group - Owner Occupied Variable

5.89% p.a. variable

5.89% p.a.

  • Extra repayments allowed
  • Redraw facility

80-90%

The Mutual Bank - Budget Owner Occupied Variable Home Loan

5.89% p.a. variable

5.89% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

G&C Mutual Bank - First Home Buyer Loan (Special)

5.90% p.a. variable

5.93% p.a.

  • 100% offset account
  • Redraw

95%

Arab Bank Australia - Essentials Home Loan Variable

5.90% p.a. variable (discount of 3.49% off standard variable rate)

5.94% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

The Mac Credit Union - Owner Occupied Variable

5.92% p.a. variable (2-year intro rate)

7.57% p.a.

  • Extra repayments allowed
  • Redraw facility

95%

Greater Bank - Great Rate Home Loan Variable

5.94% p.a. variable (special offer)

5.95% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Hume Bank - liteBlue Owner Occupied Variable

5.94% p.a. variable

5.95% p.a.

  • Extra repayments allowed
  • Redraw facility

60%

Tiimely Home - Livein Owner Occupied

5.94% p.a. variable

5.95% p.a.

  • 100% offset
  • Redraw

90%

Community First Bank - Basic Home Loan Variable

5.94% p.a. variable

5.99% p.a.

  • Extra repayments allowed
  • Redraw facility

95%

The Capricornian - Offset Owner Occupied

5.99% p.a. variable

5.99% p.a.

  • Offset
  • No ongoing monthly home loan fees

95%

Rates are current as of 01 May 2024. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate variable construction home loans in Australia, we can't guarantee that all loans available in the market are shown.

Best fixed rate construction loans compared

The table below shows a selection of the best fixed construction home loan rates currently available. These rates are based on principal and interest repayments and the table is sorted by the lowest interest rate, then the lowest comparison rate.

Australian Mutual Bank - Fixed Rate Home Loan

Fixed interest rate

5.48% p.a., fixed for 3 years

5.63% p.a., fixed for 2 years

5.63% p.a., fixed for 5 years

Comparison rate^

6.24% p.a. (3-year fixed)

6.35% p.a. (2-year fixed)

6.16% p.a. (5-year fixed)

Features
  • No monthly or annual fees
  • Additional repayments up to $20,000 allowed
Maximum loan to value ratio (LVR)

95%

Illawarra Credit Union - The Works Package Home Loan Fixed

Fixed interest rate

5.79% p.a., fixed for 3 years

5.79% p.a., fixed for 2 years

Comparison rate^

6.62% p.a. (3-year fixed)

6.67% p.a. (2-year fixed)

Features
  • No annual credit card fee
  • Split loan option
Maximum loan to value ratio (LVR)

95%

G&C Mutual Bank - Owner Occupied Fixed

Fixed interest rate

5.80% p.a., fixed for 3 years

Comparison rate^

5.86% p.a.

Features
  • Extra repayments of up to 5% of the loan balance each year
  • Redraw
Maximum loan to value ratio (LVR)

95%

Queensland Country Bank - Rate Package Home Loan Fixed

Fixed interest rate

5.89% p.a., fixed for 2 years

Comparison rate^

6.48% p.a.

Features
  • Extra repayments allowed
Maximum loan to value ratio (LVR)

80%

Greater Bank - Great Rate Home Loan Fixed

Fixed interest rate

5.94% p.a., fixed for 5 years

5.94% p.a., fixed for 4 years

5.94% p.a., fixed for 3 years

Comparison rate^

7.02% p.a. (5-year fixed)

7.15% p.a. (4-year fixed)

7.31% p.a. (3-year fixed)

Features
  • Low fees
Maximum loan to value ratio (LVR)

95%

Pacific Mortgage Group - Owner Occupied Fixed

Fixed interest rate

5.99% p.a., fixed for 1 year

Comparison rate^

5.90% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

80-90%

Newcastle Permanent - Premium Plus Package Fixed (Special)

Fixed interest rate

5.99% p.a., fixed for 5 years

5.99% p.a., fixed for 4 years

5.99% p.a., fixed for 3 years

5.99% p.a., fixed for 2 years

Comparison rate^

7.32% p.a. (5-year fixed)

7.45% p.a. (4-year fixed)

7.59% p.a. (3-year fixed)

7.76% p.a. (2-year fixed)

Features
  • Extra repayments allowed up to $25,000 per year
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

Macquarie Bank - Basic Home Loan Fixed

Fixed interest rate

5.99% p.a., fixed for 3 years

Comparison rate^

6.12% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

70%

BCU Bank - Fixed Rate Loan

Fixed interest rate

5.99% p.a., fixed for 2 years

Comparison rate^

6.26% p.a.

Features
  • Extra repayments allowed up to $25,000 per year
  • Redraw facility
Maximum loan to value ratio (LVR)

95%

Bendigo Bank - Complete Home Loan Fixed

Fixed interest rate

5.99% p.a., fixed for 2 years

Comparison rate^

6.41% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

95%

Fixed interest rate Comparison rate^FeaturesMaximum loan to value ratio (LVR)

Australian Mutual Bank - Fixed Rate Home Loan

5.48% p.a., fixed for 3 years

5.63% p.a., fixed for 2 years

5.63% p.a., fixed for 5 years

6.24% p.a. (3-year fixed)

6.35% p.a. (2-year fixed)

6.16% p.a. (5-year fixed)

  • No monthly or annual fees
  • Additional repayments up to $20,000 allowed

95%

Illawarra Credit Union - The Works Package Home Loan Fixed

5.79% p.a., fixed for 3 years

5.79% p.a., fixed for 2 years

6.62% p.a. (3-year fixed)

6.67% p.a. (2-year fixed)

  • No annual credit card fee
  • Split loan option

95%

G&C Mutual Bank - Owner Occupied Fixed

5.80% p.a., fixed for 3 years

5.86% p.a.

  • Extra repayments of up to 5% of the loan balance each year
  • Redraw

95%

Queensland Country Bank - Rate Package Home Loan Fixed

5.89% p.a., fixed for 2 years

6.48% p.a.

  • Extra repayments allowed

80%

Greater Bank - Great Rate Home Loan Fixed

5.94% p.a., fixed for 5 years

5.94% p.a., fixed for 4 years

5.94% p.a., fixed for 3 years

7.02% p.a. (5-year fixed)

7.15% p.a. (4-year fixed)

7.31% p.a. (3-year fixed)

  • Low fees

95%

Pacific Mortgage Group - Owner Occupied Fixed

5.99% p.a., fixed for 1 year

5.90% p.a.

  • Extra repayments allowed
  • Redraw facility

80-90%

Newcastle Permanent - Premium Plus Package Fixed (Special)

5.99% p.a., fixed for 5 years

5.99% p.a., fixed for 4 years

5.99% p.a., fixed for 3 years

5.99% p.a., fixed for 2 years

7.32% p.a. (5-year fixed)

7.45% p.a. (4-year fixed)

7.59% p.a. (3-year fixed)

7.76% p.a. (2-year fixed)

  • Extra repayments allowed up to $25,000 per year
  • Redraw facility

80%

Macquarie Bank - Basic Home Loan Fixed

5.99% p.a., fixed for 3 years

6.12% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

BCU Bank - Fixed Rate Loan

5.99% p.a., fixed for 2 years

6.26% p.a.

  • Extra repayments allowed up to $25,000 per year
  • Redraw facility

95%

Bendigo Bank - Complete Home Loan Fixed

5.99% p.a., fixed for 2 years

6.41% p.a.

  • Extra repayments allowed
  • Redraw facility

95%

Rates are current as of 01 May 2024. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate fixed investment home loans in Australia, we can't guarantee that all loans available in the market are shown.

How do construction loans work?

Construction home loans are designed to fund the building of residential homes or investments, as well as major renovations to existing dwellings. They work similarly to standard home loans, but with some key differences.

  • It's often paired with a land loan to finance the purchase of the land, with the construction loan typically following afterward
  • As part of the application process, you need to give the lender your builder's fixed-price quote detailing the total cost of the project broken down into each stage of construction.
  • If approved, the lender will release funds as needed to complete each stage of the construction. This is called a ‘progressive drawdown’.
  • You’ll only pay interest on the amount you’ve drawn down.
  • You have the option to make interest-only home loan repayments while construction is in progress.
  • When the build is finished your construction loan will revert to a normal home loan and you’ll start making both principal and interest repayments.
  • As with a normal home loan, it’s best to have a deposit equal to 20% of the build cost before applying (i.e. a loan-to-value ratio below 80%). You may be approved with as little as 5% but you may have been charged extra fees such as LMI along with higher interest rates.
  • When your home is built your construction will be converted into a standard owner-occupier home loan (or an investment property loan if you are renting the home out).

Why go interest-only on a construction loan?

Mansour Soltani

“While you’re doing the construction, most lenders will allow you to pay interest-only on your loan for 12, 18 or 24 months. The reason a lot of borrowers want to do that is for cash flow. While you're building you're generally renting, which is a big added expense and lower repayments can be a big help.”

Mansour Soltani, Money.com.au's home loan expert

Construction loan versus standard home loan

Construction loanStandard home loan

Purpose

Finance the construction of a new home or major renovation

Finance purchase of existing home (including new builds)

Deposit required

At least 5% (but ideally 20%)

At least 5% (but ideally 20%)

Finance provided

Gradually as payments are required at various stages by the builder

All loan funds are released at once

Interest

Charged on amounts drawn down only

Charged on the full loan amount from the start

Repayments

Usually interest-only during construction

Usually principal and interest, but some loans offer an interest-only option for a set period

Construction home loan progress payments (how the loan funds are released)

1

Foundations

Laying foundations of the house and installing plumbing (e.g. 10% of total loan).

2

Frame

Building the frame of your property including roofing, windows, walls and trusses (e.g. 15-20% of total loan).

3

Lock up

Construction of internal walls, doors and insulation of the home. This includes everything that is required to be able to ‘lock up’ your property and make it weathertight (e.g. 30-35% of total loan).

4

Fit-out

The finer details of the home are added such as shelving, kitchen & bathroom cabinetry, tiles and internal cladding (e.g. 20% of total loan).

5

Completion

Everything that is required to complete the home. This may include installation of retaining walls or fences as well as cleaning of the site (e.g. 15% of total loan).

IMPORTANT: With the exception of the final payment upon completion, your lender won’t inspect your property to ensure each stage has been completed. Instead, it will be your responsibility to check the work has been finished, and to then forward the builder’s invoice to the lender for payment.

Australia's Money Matchmaker matching you with your best loans across multiple lenders
Some lenders charge a fee for each time a progressive drawdown of a construction loan is made. These fees are generally added to your total loan amount.

Expert tip: How construction loan progress payments work

Mansour Soltani

"When you're negotiating with your builder, they will outline how much they want to be paid at each stage. But it's actually the bank that will dictate how the builder gets paid. As a client, it’s best to have that conversation up front with your builder to set the expectation that at the end of the day, how and when the payments are made will be up to the bank and not you."

Mansour Soltani, Money.com.au's home loan expert

Motorcycle loan documents

How to apply for a construction home loan

To apply for a construction loan, you’ll need to give the lender all the usual documentation required when taking out a normal home loan, including:

  • Proof of identity
  • Proof of income
  • Record of expenses
  • Proof of your other debts
  • Proof of savings, investments and assets

You’ll also need to supply documents relating to your planned build...

Other documents required for a construction loan application

While some builders are reluctant to offer fixed-price building contracts (due to quickly-rising costs), it’s usually a requirement of the lender that the contract is based on a fixed price.

This will generally need to include:

  • An outline of each construction stage
  • A progress payment schedule
  • A construction timeline
  • Total costs for the project

This will also be provided by your builder or architect and will include all details of your home including layout, size, specifications, materials used and more.

Before your construction loan is formally approved your lender will arrange for a valuation of the home’s value as if it were completed. To do this, the valuer will need both the building contract and the building plans.

The estimate of the valuation on completion will be based on recent sale prices of other comparable homes in the area. This is done to ensure you’re not overspending on your build, and that your home will be worth more than the loan amount when completed (i.e. avoiding negative equity).

The lender will want to see proof that the property and project is adequately insured throughout. This generally includes:

  • Builder’s All Risk Insurance: Covers risk to the building while it’s being constructed.
  • Public Liability Insurance: Covers damage to property or injury to people relating to the construction.
Australia's Money Matchmaker matching you with your best loans across multiple lenders
The average build time for detached houses in Australia increased from 10.3 months to 11.7 months in 2022/23, according to Master Builders Australia. Keep your potential build time in mind when applying for your construction loan.

Owner-builder construction loans explained

To secure a construction loan, you usually need to sign a contract with a qualified builder. If you want to build your home yourself, you’ll need to apply for an owner builder construction loan, offered by a limited number of lenders.

Getting approval can be difficult for this type of loan because lenders view owner-builder projects as more risky (e.g. prone to cost overruns). If you’re a licensed builder you may be able to secure a loan for up to 80% of the build’s cost - if you’re not you may only be able to borrow 50-70%.

Because lenders are so strict with these types of loans, before you apply you should make sure:

  • You have a deposit of at least 20% if possible.
  • You have a good credit score and minimal debt.
  • You have a detailed plan for construction including cost estimates and quotations for tradesmen and materials.

Since not all lenders offer these types of loans, it may be better to speak to a mortgage broker to help you find the right fit.

Can I build or renovate without a construction loan?

You generally need a construction loan to build a new home or carry out major structural renovations to a home. Lenders are usually reluctant to provide finance for a major building project up-front through a standard home loan.

However, for non-structural work, a construction loan may not be necessary. Instead, if you have a high level of equity in your property, you may be able to refinance your home loan to borrow more.

Our home loans expert, Mansour, offers the following example:

  • “Let's think about a property owner with a home worth $1 million and $500,000 of equity. In other words, their home loan is $500,000."

  • “And let’s say they want to do a couple of non-structural renos costing $200,000 in total. What they can do is talk to their bank or broker and l say, ‘I want to release equity’."

  • “If the bank approves it, it will increase their existing loan from $500,000 to $700,000, with a new separate loan account the borrower can withdraw from to pay for the renovations as they need it."

  • “Now instead of the 50% equity they started with, it's back at 30%.”

Home Renovations Loans

What about home renovation loans?

Another option for smaller renovations is a home renovation loan. These are different to construction loans and are essentially personal loans that can be used to pay for non-structural renovations.

Home renovation loans are generally easier and faster to apply for, with shorter repayment terms (1-5 years typically). However, personal loan interest rates tend to be higher than what’s available with a construction loan.

Construction home loans FAQ

A construction loan is a home loan specifically designed to fund the construction of residential homes and investments.

Most major banks and lenders offer construction loans including:

  • Westpac
  • NAB
  • Commbank
  • ANZ
  • ING
  • HSBC
  • Macquarie Bank
  • Suncorp Bank
  • St.George Bank
  • Heritage Bank
  • BOQ
  • Beyond Bank
  • Bendigo Bank
  • Bankwest
  • BankSA
  • Bank of Melbourne
  • Great Southern Bank
  • Bank Australia

Banks may have slightly more stringent restrictions and credit policies when assessing construction loans because they are considered higher risk than regular home loans. That’s because:

  • Lenders cannot see the finished home when issuing the loan (they are relying on estimates of the eventual value of the home).
  • There are risks that costs may overrun.
  • The property may be worth less than the loan amount when completed.

Another barrier is the requirement of lenders to have a fixed-price contract from the builder before approving the loan. Some builders are reluctant to offer fixed-price contracts.

Because of the increased risk and uncertainty for the lender, in many cases construction loans are more expensive compared to average mortgage rates.

But some lenders offer the same rates on construction loans as they do on other home loan (e.g. first home buyer loans). They key is to shop around for the best rates.

To secure a construction loan you must have:

  • A deposit equal to at least 5% of the total cost of the construction and land (but at least 20% is preferable).
  • A contract from a registered builder including a quote for the total cost, a schedule for the build, and a cost breakdown for each stage of the build.
  • Building plans.

You’ll also need all the documents required to apply for a normal home loan including:

  • Proof of identity
  • Proof of income (if you cannot provide this using the usual documentation because you are self-employed, you could consider a low doc home loan)
  • Proof of debt
  • Proof of savings, investments and assets
  • Record of spending
  • Gift letter (if part of your deposit has been given to you as a gift)

This may be possible through what's know as a bridging loan. This type of loan is designed for borrowers who have an existing home but don't want to sell it before purchasing their next property.

Home Loans guides and resources

What's the next step on your property journey? Our home loan guides will help you navigate the road ahead, whether you're buying, building or looking to save on an existing loan.

Written by

Shaun McGowan Money.com.au founder

Loans Expert

Shaun McGowan

Reviewed by

Sean Callery Editor Money.com.au

Editor

Sean Callery

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