Construction loans are designed to fund property projects progressively rather than as one lump sum. They are commonly used for duplex, townhouse, apartment, subdivision, mixed-use, industrial and commercial developments where staged funding, project timing and exit strategy all matter.
At Formation Finance, we help structure construction loans for self-employed individuals, property investors, owner-builders and developers, covering the gap that traditional banks leave for borrowers and projects that don’t fit standard bank criteria.
A construction loan typically sits in the middle of the property development finance lifecycle, following the land loan stage and preceding residual stock finance at project completion.
| Key Features | Individual / Small Investor | Developer / Commercial |
|---|---|---|
| Loan amount | $300k – $1.5M | $1M – $50M+ (case-by-case) |
| Term | Up to 30 years (12-month build period) | Up to 36 months (build only) |
| Up to LVR | Up to 80% (of on-completion value) | Up to 70% GRV / 80% TDC |
| Interest rate from | From 7.5% p.a. (subject to security & profile) | From 9.99% p.a. (subject to deal & security) |
| Income docs | Full doc / Low doc / No doc options | Asset-backed, project feasibility based |
| Repayment | Interest-only during build, then P&I | Interest-only (capitalised interest available) |
| Application fee | 0.5% – 1.5% (of loan amount) | 1.5% – 2.5% (of loan amount) |
| Typical timeframe | Indicative 2–5 days • Settlement 3–6 weeks | Indicative 48 hours • Settlement 2–6 weeks |
All figures are indicative only and not an offer of finance. Availability, terms and timing are subject to valuation, security, lender approval, legal/settlement requirements and receipt of required documentation. For business and investment purposes only.
A construction loan releases funds in stages as the build progresses, rather than advancing the full facility upfront. Funds are drawn against completed milestones such as slab, frame, lock-up, fixing and completion, once the required supporting documents are provided. In most cases, interest is charged only on the amount already drawn, not the full approved facility, which keeps holding costs lower while the build is underway.
Because the property doesn’t exist yet, the lender values it on an “as-if-complete” basis, meaning what the finished build will be worth rather than its current land value alone. This structure keeps funding aligned with the actual pace of construction and lets the lender monitor cost, timing and delivery risk throughout the project.
Construction loans in Australia broadly split into two categories. Understanding which fits your scenario determines which lender route is most cost-effective.
| Bank Construction Home Loan | Non-Bank / Specialist Construction Loan | |
|---|---|---|
| Best for | PAYG owner-occupiers building a single home with full documentation | Self-employed, low doc, owner-builders, imperfect credit, developers |
| Loan size | $300k – $1M | $300k – $50M+ |
| Documentation | Full doc (tax returns, payslips, financials) | Full doc / Low doc / No doc options |
| LVR | Up to 95% (with LMI) | Up to 80% individual / 70% GRV developer |
| Interest rate | From ~6% p.a. | From 7.5% p.a. (individual) / 9.99% p.a. (developer) |
| Approval time | 8–12+ weeks | 48 hours indicative / 2–6 weeks to settlement |
| Owner-builder | Rarely approved | Considered case-by-case |
| Pre-sales (developers) | 60–100% debt cover required | Often nil to low presales accepted |
| Term | 30 years (12-month build period) | 12–36 months (developer) / up to 30 years (individual) |
How to choose: If your application fits major bank policy — full income documentation, clean credit, licensed builder, single home — a bank construction home loan will almost always be cheaper. Specialist construction loans exist for borrowers and projects that fall outside that box: self-employed without recent tax returns, owner-builders managing their own project, borrowers with past credit issues, foreign income earners, and developers funding multi-unit or commercial schemes.
Our construction loan solutions are designed for borrowers whose scenarios fall outside major bank policy. Common profiles include:
The key difference comes down to whether the property already exists. With a standard home loan you’re buying a finished asset, so the lender can value it immediately, the full loan settles at once, and principal-and-interest repayments start straight away. With a construction loan the property doesn’t exist yet, so its final value is estimated on an “as-if-complete” basis, funds are released in stages as the build progresses, and repayments are usually interest-only until completion, after which the loan converts to principal and interest, or is refinanced or sold.
| Standard home loan | Construction loan | |
|---|---|---|
| Property | Already built | Being built |
| Valuation | Current market value | “As-if-complete” value |
| Funds released | Full amount at settlement | In stages as the build progresses |
| Repayments during | Principal & interest from day one | Interest-only on funds drawn |
| Interest charged on | Full loan balance | Only the amount drawn so far |
| After completion | — | Converts to P&I, or refinance / sale |
Lenders assess construction loans by looking at whether the project can be completed and exited on a realistic timeline, not only whether the build can be funded.
What we look at
Where relevant, planning and construction standards may also matter, particularly when a development needs to align with broader Australian building requirements such as the National Construction Code.
Yes, absolutely — duplex construction projects are commonly funded through both standard construction loans and low doc construction loans, depending on your needs and documentation.
If you’re a developer or investor building a duplex, non-bank lenders can offer more flexible terms and faster approvals than traditional banks. Whether it’s for subdivision, house-behind-house, or side-by-side dual occupancy, we can tailor construction loan solutions to match the scale and timeline of your project.
Approval times can range from a few days to a few weeks, depending on the complexity of your project and the documentation provided. Our streamlined process ensures faster decisions compared to traditional banks.
Not always. While some projects benefit from having pre-sales in place, especially for larger multi-unit developments, we assess each application individually. Our flexible approach means we may be able to offer funding without pre-sales, depending on the strength of the project and the developer’s experience.
Yes. For self-employed borrowers without recent tax returns, low doc construction loans accept income declarations supported by BAS, bank statements or accountant letters. No doc construction loans are available for asset-backed scenarios where the project feasibility, security and exit strategy carry the assessment without income verification. Both options price higher than full doc to reflect the additional risk.
Owner-builder construction loans are available but more restrictive than standard builder-led construction loans. Most lenders cap LVRs at 50–70% (vs 80%+ with a licensed builder), require detailed cost estimates and HBCF/HBWI insurance, and prefer borrowers with relevant construction or trade experience. Banks rarely approve owner-builder scenarios above small renovations.
For owner-occupier and small investor construction loans, minimum deposit is generally 20% (LVR up to 80%); some lenders accept 10% with lenders mortgage insurance. For developer construction loans, minimum equity contribution is typically 20–25% of total development cost on senior debt, dropping to 10–15% with mezzanine finance.
Reviewed by Kai Yu, Partner at Formation Finance
Kai Yu holds a Bachelor of Architecture and Master of Construction Management (Property) from the University of Melbourne, and a Graduate Certificate of Finance from Macquarie University, and has 10+ years of experience structuring property construction finance for Australian developers.
Last update: 22/06/2026
