Australians built 1.02 million homes between the 2016 and 2021 financial years – a large increase from the long-term average, which typically involves around 750,000 homes being completed in each five-year period. In the past 12 months, 231,816 residential construction approvals have been issued, indicating that many new homes are under construction. That said, not all of those approved ultimately went ahead with the project. Low interest rates and government incentives are two big reasons for the recent construction boom.

Construction loans are in some ways similar to regular home loans. Interest rates are similar and you can choose between floating and fixed. However, the way lenders deliver money to borrowers is different. For construction loans, lenders will approve loans in phases or “withdrawal” as various stages of the construction contract are completed. Lenders only charge interest on the funds provided, not the full amount. So, if you have a total loan of $500,000 and you only receive $100,000, you will be charged interest on $100,000, not $500,000 in full.

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