Construction loan option
Why choose our construction option?
You’re in control: draw down your loan in stages (i.e. slab, frame, lockup, fit out, completion), only once you’ve approved the inclusions and quality of finish.
Manage cash flow
Interest Only payments are available during construction, to help with cash flow.
Only pay interest on funds drawn down – not the whole amount upfront – which means lower repayments for you.
Frequently asked questions
There are no progress draw fees or additional bank fees with our construction option. As for non-bank fees, you may need to budget for the following, based on the complexity of your build:
- A property valuer fee for progress inspections, outlined in your Loan Offer.
- A quantity surveyor report, if your valuer determines you need one.
We’ll let you and your builder know, by issuing a ’Builders Pack’, containing the info and documents needed during the building phase of your new home or reno.
They let you use your construction option to pay for specific stages of your build or reno, at various steps of completion. We only charge interest on the amount you’ve drawn down, rather than the total construction option amount you’re approved for, which helps you keep the cost of your construction option down.
There are various ways progress payments can be requested, all advised within your ‘Builders Pack’.
If your builder needs money upfront to issue plans, you’ll need to cover that yourself. If you’re contributing any of your own money, do so before the first Progress Payment’s made.
Your final Progress Payment is subject to a satisfactory final inspection from our valuer, confirming the construction’s been completed as per the original plans and specs. You’ll also need a new building insurance quote.
The building process is split into standard construction stages, here’s an example of a 5-stage schedule:
- Foundations/Slab – laying the foundation, levelling the ground, plumbing and waterproofing the foundation.
- Frame – building the frame, partial brickwork, the roofing, trusses and windows.
- Lockup – external walls, lockable windows and doors.
- Fitout – gutters, plumbing, electricity, plasterboards and the partial installation of cupboards.
- Practical completion/final stage – finishing touches, final plumbing, electricity, overall cleaning and final payments for equipment and builders.
- Council approved plans and specs (or, if not yet approved, a copy of those plans which have been, or are to be submitted to Council for approval)
- Signed & dated building contract, including the building stages and schedule of payments
- Variations/quotes, if applicable
- Quantity Surveyor Report for building contracts > $1m.
Before settlement (drawdown):
- Council approved plans and building specs (if not already provided)
- Builders Risk Insurance and a copy of your builder’s ‘Public Liability Insurance’.
If you have equity in your property, you may be able to use it to increase your home loan, without using your to-be-constructed property as security. You might also be able to top up using equity you have in other investment properties or your block of land.
One potential downside is you’ll have to fully draw your home loan from the start. Unlike the construction option, which only charges interest on what you’ve drawn down, a top up will mean you’ll start paying interest on the whole loan at the outset.
If you have a 100% offset account, you could move any not-yet-spent construction money over to offset this, but some extra costs might apply.
Fixed price contracts are designed to cap the budget on a construction (which are good for tight budgets).
Cost plus contracts involve trust between you and your builder. They’ll generally agree on an hourly rate for tradies and their builders, and an extra percentage cost to order and schedule materials (also known as a builder’s margin). On one hand, you’ll have more control over expenditure decisions. On the other, as you near your budget, your builder can have less responsibility should costs overrun.
A non-structural renovation is a cosmetic upgrade, like laying floorboards or repainting the exterior or inside. Generally, you shouldn’t spend any more than 10% of your home’s value.
A structural renovation’s a substantial change to your home, like moving walls, adding another level or adding an extension. Building codes differ between states and territories, there’s no real spending limit, but if it’s over $1m you may need a quantity surveyor.
Yes. The construction option is available for construction or renos/home improvements using licensed builders (either fixed price or cost plus contracts), or by owner-builders. Includes kit homes, multiple dwellings, transportable homes and house/land packages.
A few years back, home buyers Susan and Mike bought a run-down yet perfectly liveable house on a block of land in the metro suburbs. Renting at the time, they planned on knocking down and rebuilding when they were ready to start a family. Well, that time had come. While checking out display homes and chatting to builders and architects, they realised they needed to talk money with lenders first.
Westpac offered a good interest rate with plenty of freedom, like flexible Progress Payments and Interest Only repayments during construction. They confirmed quotes, signed up their builder to manage the project, and with their $250,000 finance sorted, focused on the fun stuff: colour scheme, furniture and the nursery.
No matter how much planning you do, unexpected costs and delays are sometimes inevitable. So it helps to know regulations, the process and any tips before you start – check out the Australian Government’s yourhome site.
- For a house and land package, your first drawdown would be for the land and subsequent progress draws would cover each stage of building your home.
- Just buying land with no building contract? You can apply for a regular Westpac home loan without the construction option.
- Looking to switch your existing land loan with another lender to Westpac? Apply to refinance today.
You can apply online in as little as 20 minutes. You'll be assigned a home lending expert who’ll call you to chat about any features you’d like to include, such as our construction option and splitting your loan.
Things you should know
Credit criteria, fees and charges apply. Terms and conditions available on request. Based on Westpac's credit criteria, residential lending is not available for Non-Australian Resident borrowers. This information has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and, if necessary, seek appropriate professional advice. This includes any tax consequences arising from any promotions for investors and customers should seek independent advice on any taxation matters.