Construction Loan Explained: Process, Stages and Broker Tips

What is a Construction Loan?

A construction loan is a type of home loan designed specifically to fund the building of a new home or significant renovation. Unlike a traditional home loan where the full amount is disbursed upfront, a construction loan is paid out in progress payments, aligned with the stages of your build.

Why choose Stryve? We ensure you get the right product from the right lender, saving you time, money, and stress during construction.

How Construction Loans Work - Broker Insights

Construction loans are purpose-built to fund a home build or major renovation and they work very differently from standard home loans. For an overview of how staged payments and construction financing work, the MoneySmart construction loan guide offers a helpful consumer breakdown. At Stryve Finance, we simplify the process and match you with the lender and structure best suited to your project.

1. Progressive Drawdowns: The loan is released in stages known as progress payments as each building milestone is completed (e.g. slab, frame, lock-up).
2. Interest-Only During Construction: You only pay interest on the amount that’s been drawn down, not the full loan — helping reduce costs during the build.
3. Final Conversion: Once construction is complete, the loan typically converts to a standard principal and interest repayment loan.
4. Inspections Required: Lenders conduct inspections at each stage before releasing funds, ensuring work aligns with approved plans.

At Stryve, we’ve helped dozens of clients navigate staged payments, council delays, and valuation shortfalls — all common pain points in construction loans.

Why Stryve Makes It Easier

We act as your personal construction loan strategist, navigating the complexity so you don’t have to. We work directly with your builder and lender to ensure that each progress payment is released on time, avoiding unnecessary construction delays.

We can match you with those who are more flexible and experienced with your specific build type, location, or contractor. Beyond just getting you approved, we tailor your loan structure to fit your budget, deposit, and cash flow goals.

Most importantly, we manage all the back-and-forth communication with banks, valuers, and builders, so you stay focused on your build, not the paperwork.

Stages of Construction (And Payments)

One of the most important aspects of a construction loan is how the funds are released. Instead of receiving the full loan upfront, your lender will disburse payments in stages, known as progress payments, aligned with key milestones in your build. Each stage must be completed and inspected before the next payment is made.

Here’s how it typically breaks down:

Important Notes

• Each payment stage must be verified by a lender-approved valuer before funds are released.
• Delays in inspections or paperwork can stall payments. Stryve helps coordinate these efficiently.
• If the build cost changes mid-project, we help reassess your borrowing capacity or adjust lender requirements.

Eligibility and Requirements

Getting approved for a construction loan is more complex than a standard home loan because lenders are financing a project, not just a property. At Stryve Finance, we help streamline the process by preparing your application with the right documents, matching you with lenders who support your specific project type, and anticipating lender expectations.

What You’ll Typically Need:

• Deposit (5%–20%)
  Most lenders require at least a 10% deposit, although low-deposit options may be available for first home buyers or with guarantor support.
• Fixed-Price Building Contract
  A signed contract with a licensed builder that includes a clear breakdown of costs and timelines is essential. Some lenders will not accept cost-plus or incomplete contracts.
• Council-Approved Plans and Permits
  You’ll need approved architectural plans, site surveys, and development approvals before funds are released.
• Builder Credentials
  The lender will verify that your builder is licensed, insured, and experienced with similar projects.
• Builder’s Insurance
  This includes domestic building insurance or home warranty insurance, protecting you in case the builder fails to complete the project.
• Detailed Cost Estimates or Quotes
  These should be comprehensive, covering materials, labour, and any additional fees such as site costs or landscaping.
• Valuation of Proposed Property
  The lender will arrange a valuation based on the expected finished value of your property, which can affect your maximum loan amount.
• Proof of Income and Financial Position
  Standard income verification, credit check, and existing liabilities review apply, especially important for assessing serviceability during construction.

Navigating these requirements can feel overwhelming, especially with varying criteria across lenders but that’s where we come in. At Stryve Finance, we prepare it strategically, flag potential red flags in advance, and align your application with lenders most likely to approve your specific build

Step-by-Step: Construction Loan Process with Stryve

We make the construction loan process clear, strategic, and hassle-free. From the first consultation to your final drawdown, we’re in your corner to ensure every piece of the puzzle fits.

Here’s how our expert mortgage brokers guide you through the process:

1. 1. Initial Consultation: We start by understanding your project goals, financial position, and builder details. Whether you’re buying land and building or already have plans approved, we tailor the finance path to suit you.
2. 2. Pre-Approval: Once we’ve reviewed your income, credit history, and deposit, we secure a pre-approval with a lender that fits your build type and budget. This gives you confidence when negotiating with builders or finalising plans.
3. 3. Builder and Contract Review: We assess your builder’s credentials, check the contract for lender suitability, and confirm the structure meets valuation and insurance requirements. If needed, we suggest adjustments before submission.
4. 4. Loan Submission and Valuation: We compile your documents and lodge the application. The lender will arrange a valuation based on your land and proposed construction plans. We follow up closely to ensure everything stays on track.
5. 5. Formal Approval and Drawdown Setup: Once approved, we walk you through the loan terms and set up the progress payment schedule. You’ll only pay interest on funds drawn during construction stage.
6. 6. Ongoing Support During Construction: Throughout the build, we assist with submitting progress requests, coordinating inspections, and keeping communication flowing between you, the builder, and the bank.

From securing the right lender to managing progress payments and approvals, our role is to protect your timeline, your budget, and your peace of mind. Building a home is a big project, your finance strategy should be just as solid.

Construction Loan vs Home Loan vs Renovation Loan

Choosing the right loan type depends on your goals, your property, and the stage you’re at in your homeownership journey. While a construction loan offers flexibility for new builds, it comes with more steps and documentation. A standard home loan is best suited for purchasing an existing property, while a renovation loan is ideal for upgrading or extending your current home.

Who Should Use a Mortgage Broker?

Construction loans involve more moving parts than a typical home loan, and that’s where a mortgage broker like Stryve Finance adds real value. We help you navigate complex lender requirements, manage paperwork, and ensure your application is structured for approval.

Most clients underestimate how often lender delays can impact build timelines. We proactively manage progress payments to keep things moving.” - Dylan Bertovic, Senior Mortgage Broker, Stryve Finance

Whether you’re a first-time builder, self-employed, or managing a custom project, we know which lenders suit your situation. Instead of dealing with banks directly, we handle the hard parts. So you can focus on your build with confidence.

Common Pitfalls (and How We Help You Avoid Them)

Construction loans offer flexibility, but they also come with unique risks that can disrupt your timeline, inflate your costs, or even jeopardize your build. At Stryve Finance, we work proactively to identify and prevent these issues before they become costly mistakes.

• Underestimating Total Build Costs

  Many borrowers focus only on the builder’s quote and overlook site costs, landscaping, fencing, or post-construction expenses. We review all quotes and help build a realistic buffer into your loan structure.

• Valuation Shortfalls

  If the lender’s valuer assesses the completed home at a lower value than expected, your loan amount may be reduced. We pre-screen comparable sales and lender preferences to align your budget with market expectations.

• Delays in Drawdowns

  Each stage requires lender inspection and approval, and poor timing or missing documents can delay payments to your builder. We manage drawdown requests, coordinate with your builder, and ensure everything is in place for fast approvals.

• Cash Flow Pressure During Build

  Unexpected costs or timeline blowouts can strain your finances during the interest-only period. We assess your affordability across different scenarios and recommend contingency planning.

Working with a broker like Stryve means you’re not just reacting to issues, you’re staying one step ahead. We help you avoid the traps that cause delays, cost overruns, or stress, so you can focus on what matters: building with confidence.

Success Story

Sarah and Daniel had recently purchased land in a new estate and were ready to build their dream home. However, as first home buyers, they felt overwhelmed by the paperwork, lender options, and construction timelines. They weren’t sure how much they could borrow or which lenders would support their builder’s contract.

How Stryve Helped:

• We reviewed their financial position and helped them qualify for the First Home Owner Grant and stamp duty savings.
• Our brokers secured pre-approval with a lender offering a low deposit construction loan and favourable progress payment terms.
• We coordinated directly with their builder to ensure the fixed-price contract met lender criteria.
• Throughout the build, we managed drawdown requests, handled valuation issues, and kept the couple informed every step of the way.

Stryve made the process stress-free from slab to settlement! We had no idea how many moving parts there were, but they handled everything. We wouldn’t have got through it without them.” - Sarah D.

Sarah and Daniel moved into their new home on schedule with a competitive interest rate, no funding delays, and zero stress from start to finish.

Frequently Asked Questions (FAQ)

Start Building with Confidence

At Stryve Finance, we specialise in simplifying complex finance like construction loans. Whether you're a first-time builder, investor, or developer, we’re here to support your journey with expert advice, lender access, and unmatched service.

👉 Book a free strategy session with a Stryve Construction Loan Specialist today.