Compare construction loans offered in Australia

Find home loans from a wide range of Australian lenders that best suit your needs, whether you're investing, refinancing or looking to buy your first home. Compare interest rates, mortgage repayments, fees and more. - Data last updated on 19 Mar 2019

Compare construction home loans

1 - 18 of 18
Product
Advertised rate
Comparison rate*
Monthly repayment
Company
Features
Real Time Rating™
Go To Site
View Now
Compare

More details

Enquire Now
Compare

More details

View Now
Compare

More details

Advertisement
Advertisement

View Now
Compare

More details

Enquire Now
Compare

More details

View Now
Compare

More details

View Now
Compare

More details

View Now
Compare

More details

View Now
Compare

More details

Enquire Now
Compare

More details

View Now
Compare

More details

View Now
Compare

More details

Advertisement
Advertisement

View Now
Compare

More details

View Now
Compare

More details

Construction loans

It's a dream for many people to build their own home. You may expect that when you come to buy a property, you'll either buy one that has been lived in or buy one off-plan from a housing developer. If you're imaginative and prepared to take a few risks, you could as an alternative build your own home with the assistance of construction loans.

What is a construction loan?

In simple terms, it's a loan that you can use to pay for the cost of building your new home. It's usually a short-term loan and can be offered for a specific amount of time – generally around a year – giving you the time that you need to complete the build. When the build is finished, you'll have to pay off the construction loan by taking out a new loan, often known as the "end loan." That means you'll need to refinance at the end of the construction loan term, and many people have a standard mortgage at a fixed or variable rate to move things forward.

How does a construction loan compare to other similar products?

You need to look at rates, which are likely to be more expensive than an ordinary mortgage. That's because the lender doesn't have a tangible asset, just something that is expected to be constructed. It's hard for a lender to value this, and so if property prices in the neighbourhood fall or the builder doesn't do a good job, the lender could suffer from a poor investment. Banks and other financial institutions may be wary of lending for this type of loan, so you need to work on giving your potential lender confidence that the project will be successful.

What are the main features that you need to consider for a construction loan?

You need to know that you can afford it – you may only pay interest on the sums that a builder draws down from the loan, but you need to know that you can refinance at the end of your project and afford those payments. Your lender will want the involvement of a qualified builder and be provided with detailed specifications for the building, including what materials will be used, and a timescale. Expect to put down quite a large deposit as lenders will want to see that you are investing in the project as well as them. A good credit rating will help when lenders are weighing up whether or not to support you.

Are there serious risks?

There can be if you're not meticulously organised. Timescales frequently slip for construction projects, sometimes due to poor weather conditions, sometimes due to a builder not adhering to the project timetable. Delays can cost you money, so you need to tie everything up contractually as tightly as you can, including penalty clauses for delays. Make sure that the plans for the building are accurate and what you want, and take the time to discuss these in detail with your builder, and ensure that the lender also has them. Your reward at the end? Your own home, exactly how you want it, and a great asset for the future.

FAQs

They’re impersonal 

Most comparison sites give you information about rates, fees and features, but expect you’ll pay more with a low advertised rate and $400 ongoing fee or a slightly higher rate and no ongoing fee. The answer is different for each borrower and depends on a number of variables, in particular how big your loan is. Comparisons are either done based on just today or projected over a full 25 or 30 year loan. That’s not how people borrow these days. While you may take a 30 year loan, most borrowers will either upgrade their house or switch their home loan within the first five years. 

You’re also expected to know exactly which features you want. This is fine for the experienced borrower, but most people know some flexibility is a good thing, but don’t know exactly which features offer more flexibility than others. 

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

They’re not always timely

In today’s competitive home loan market, lenders are releasing new offers almost daily. These offers are often some of the most attractive deals in the market, but won’t get rated by traditional ratings systems for up to a year. 

The assumptions are out of date 

The comparison rate is based on a loan size of $150,000 and a loan term of 25 years. However, the typical loan size is much higher than that. Million dollar loans are becoming increasingly common, especially if you live in metropolitan parts of Australia, like Sydney and Melbourne. It’s also uncommon for borrowers to hold a loan for 25 years. The typical shelf life for a home loan is a few years. 

The other problem is because it’s a percentage, the difference between 3.9 or 3.7 per cent on a $500,000 doesn’t sound like much, but equals around $683 a year. Real Time Ratings™ not only looks at the difference in the monthly repayments, but it will work out the actual cost difference once fees are taken into consideration. 

Call RateCity 1300 001 153

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

Compare your product with the big 4 banks, or add more products to compare
As seen on