Construction of a single level or double story dwelling on a residentially zoned block of land for owner occupied or investment purposes.

What type of loan do I need?

Residential investment home loan or residential owner-occupied home loan depending on the purpose or use of the residence.

Key Points:

• Most lenders will offer construction finance where there is a formal build contract in place with a registered builder who has appropriate insurances and licenses


• Standard home loan conditions apply which include servicing and policy guidelines in line with NCCP (National Consumer Credit Protection) requirements, security loan value ratios (LVR) up to 95% (lenders mortgage insurance applicable where LVR exceeds 80%) and interest rate pricing.


• Builder drawdown schedules must align with the lender’s policy guidelines.

Construction of two or three single level or double story dwellings on a residentially zoned block of land for investment purposes (or if residing in one of the finished properties – owner occupied purpose for that portion).

What type of loan do I need?

Generally, a residential investment home loan is sufficient to fund a duplex or triplex development. However, if this is a build and sell project and funding is based on pre-sales as opposed to pure servicing of the end debt, a commercial funding facility may be required.

Key Points:

• If the end debt (post construction) can be serviced from your own sources (including anticipated rental income), then usually the project can be funded as a residential home loan (investment) with usual conditions applying e.g. interest rate discounts, security loan value ratios higher than commercial business loan funding, servicing and policy guidelines in line with NCCP (National Consumer Credit Protection) requirements.


• Funding under a commercial/business loan may be required if there is a servicing shortfall on the end debt and there is a significant reliance on pre-sales to payout the end debt. The cost of funding is generally slightly higher and is usually more complex, requiring additional information such as a quantity surveyor’s report.


• If a commercial/business loan is required, loan repayments are usually calculated over a 15 year loan term (as opposed to a 30 year loan term for residential home loans), meaning monthly loan repayments will be higher.

Construction of four or more residential multi-apartments on one site, funded by a commercial/business loan.

What type of loan do I need?

A commercial/business loan is generally funded on an interest only basis for the period of construction (usually up to 18 months determined by size of project). The interest (plus contingency costs) can be capitalised into the loan during the construction period (as opposed to funding the interest payments from cashflow) subject to valuation ratios. As a guide, usually a lender will lend (inclusive of the capitalised interest and contingency costs) up to 65% of the end completion value of the project or 75% of the actual land and construction cost figure of a project. These parameters do vary slightly between lenders.

Key Points:

• Lenders will generally require builders to have previous experience with these types of projects.


• You will need the appropriate development approval, council approval and quantity surveyor approval. .


• It is imperative to consult with an experienced broker for this area of finance.


• These developments are usually funded on the basis of having sufficient pre-sale contracts in place to ensure the end debt is repaid on completion of the project. In some cases, lending may be considered where there is insufficient pre-sale contracts in place to repay the entire debt as long as the borrower can show sufficient capacity (including anticipated rental returns) to service the remaining portion of the debt.


• The maximum amount you can borrow will be determined having regard to the quantity surveyors report (cost of construction) and the valuers report (anticipated market value of the completed project). Lenders will calculate maximum borrowing as a ratio of these figures (taking into account capitalised interest and contingency costs).

These types of projects relate to construction of industrial buildings for investment or owner-occupied business use and construction of retail premises (including showrooms, retail shops and/or offices).

What type of loan do I need?

A commercial/business loan is generally funded on an interest only basis for the period of construction (usually up to 18 months determined by size of project). The interest (plus contingency costs) can be capitalised into the loan during the construction period (as opposed to funding the interest payments from cashflow) subject to valuation ratios. As a guide, usually a lender will lend (inclusive of the capitalised interest and contingency costs) up to 65% of the end completion value of the project or 75% of the actual land and construction cost figure of a project. These parameters do vary slightly between lenders.

Key Points:

• Lenders will generally require builders to have previous experience with these types of projects.


• You will need the appropriate development approval, council approval and quantity surveyor approval.


• It is imperative to consult with an experienced broker for this area of finance.


• These developments are usually funded on the basis of having sufficient pre-sale contracts in place to ensure the end debt is repaid on completion of the project. In some cases, lending may be considered where there is insufficient pre-sale contracts in place to repay the entire debt as long as the borrower can show sufficient capacity (including anticipated rental returns) to service the remaining portion of the debt.


• The maximum amount you can borrow will be determined having regard to the quantity surveyors report (cost of construction) and the valuers report (anticipated market value of the completed project). Lenders will calculate maximum borrowing as a ratio of these figures (taking into account capitalised interest and contingency costs).