Construction Loans › What is a construction home loan?

What is a construction home loan?

A construction home loan funds building a new home or a major structural renovation. Unlike a normal loan, the money is released in stages as the build reaches each milestone, and it usually converts to a standard home loan once the build is finished.

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

Why this matters

Building is different to buying, and the loan reflects that. Rather than handing over the full amount at settlement, the lender pays for work as it is completed, which protects both you and them. Understanding this staged structure up front helps you plan your cash flow through the build, when you may also be paying rent.

The key points

Funds a new build or major structural work.
Money is released in stages, not all at once.
You usually pay interest only on what is drawn so far.
It converts to a normal loan at completion.

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More construction loans questions

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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.