Construction Loans › Do I pay interest on the whole loan during construction?

Do I pay interest on the whole loan during construction?

No. During the build you pay interest only on the funds drawn down so far, not the full approved amount. Your repayments start small and rise as more of the loan is released through the stages.

Written by Ross McFarlane, Licensed Mortgage Broker (Credit Representative 526725). About the author

Why this matters

This is one of the most reassuring features of a construction loan. Early on, only a small portion is drawn, so repayments are modest while you may still be paying rent elsewhere. As the build progresses the drawn balance grows and so do repayments, which is worth budgeting for toward the end.

The key points

Interest applies only to drawn funds during the build.
Repayments start low and grow stage by stage.
This eases cash flow while you may also pay rent.
Plan for higher repayments near completion.

Free, no obligation

Finance your build the right way

Answer a few quick questions and we can structure a construction loan around your contract and timeline across a panel of more than 70 lenders.

Check Your Options

A few quick questions, no obligation.

What is your goal?

Buy a home or investment property First home, next home, or adding to your portfolio Build a house or develop land New build, renovation, duplex, or subdivision project Lower my current repayments Better rate, release equity, or restructure existing debt Finance an established commercial property Business premises or commercial investment asset

Tell us a bit more about the plan

How do you earn your income?

Standard salary or wage Full-time, part-time, or casual employment (PAYG) Self-employed or business owner Sole trader, company director, or contractor

How is your credit score?

This helps us match you to the right lender from the start.

Healthy No issues that I am aware of A few small marks A couple of late payments, now caught up Not sure, or it is complicated We work with specialist lenders for these situations

Last step. Where should we send your options?

Your information is private and we will never share it.

First Name

Last Name

Email Address

Australian Mobile Number

By submitting, you agree to be contacted by one of our team of licensed mortgage brokers. No obligation. No spam.

You're all set.

We've received your details. One of our friendly brokers will reach out within 1 business day to help guide you through your options.

More construction loans questions

Back to the full Construction Loans guide

Last reviewed: June 2026

General information only. This page provides general information about home loans and is not financial or credit advice, a quote, or a guarantee, and your personal circumstances have not been considered. Lending policies, interest rates, fees and eligibility vary by lender and change over time. Always confirm your own situation with a licensed mortgage broker or lender before acting. Ross McFarlane (Credit Representative 526725) is an authorised Credit Representative of Australian Associated Advisers Pty Ltd t/a Keylend, Australian Credit Licence 392169.