Building a home remains a popular option for Australians looking for more choice and newer housing, despite higher interest rates.
 
According to the ABS, 200,424 homebuilding approvals were issued in the year to April.
 
That’s 8.5% higher than the previous 12-month period.
 
While encouraging, it’s still below the pace needed to achieve the National Housing Accord target of building an average of 240,000 homes per year in the five years to June 2029.

How construction loans work

Construction loans differ from standard home loans.
 
Instead of receiving the full loan amount upfront, funds are generally released in stages as construction progresses.
 
Typical stages include:
  • Slab or foundation.
  • Frame.
  • Lock-up.
  • Fit-out.
  • Completion.
During construction, borrowers often pay interest-only on the amount that’s been drawn down.
 

The realities of building a home

Building your own home can offer more choice over design and access to newer features and greater energy efficiency.
 
However, it can also involve delays, variations and unexpected costs.
 
Before you sign a building contract, it’s worth understanding how construction finance works and what you may be able to borrow.