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What Is a Construction & Renovation Loan?
These loans are designed for building new homes or upgrading existing properties, with funds released in stages based on project progress. Unlike traditional mortgages, construction loans allow for progressive drawdowns, meaning borrowers only pay interest on the amount used.
How Construction & Renovation Loans Work
Lenders approve funds based on project plans, costs, and builder contracts. Payments are released at key stages, such as land purchase, foundation completion, and final build approval. Renovation loans work similarly, with funds allocated according to project milestones. Choosing the right loan ensures cash flow remains stable throughout the project.
Who Can Apply for a Construction or Renovation Loan?
These loans are available to homeowners, property investors, and developers looking to fund a new build, extension, or home improvement project. Lenders assess factors such as income, property value, and construction costs to determine eligibility.
Securing the right loan is essential for managing expenses and ensuring the project stays on track. Borrowers should consider loan terms, repayment flexibility, and interest rates to find the best financing solution.
Expert Loan Brokers for Construction & Renovation Finance
At Freedom Mortgage Solutions, we compare over 30 lenders to secure affordable construction and renovation loans with flexible drawdowns and competitive rates.
Fast Approvals & Hassle-Free Loan Structuring
We handle all loan applications, builder approvals, and lender negotiations, ensuring borrowers receive the right funding at each stage of their project.
How to Secure a Construction or Renovation Loan
Getting approved for these loans requires detailed planning. Lenders evaluate building contracts, renovation costs, and project timelines before releasing funds. Having a clear budget and working with licensed builders improves approval chances and streamlines the process.
Managing repayments is also crucial. Borrowers typically start with interest-only payments during the construction phase, transitioning to full repayments once the project is complete. Understanding these repayment structures helps homeowners and investors manage cash flow effectively.
Benefits of Construction & Renovation Loans
These loans offer tailored financing solutions for property development, allowing borrowers to control costs, manage staged payments, and only pay interest on drawn funds. With flexible repayment options, they provide an efficient way to fund home-building or improvement projects.
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FAQ
Construction loans release funds in stages rather than as a lump sum. Borrowers pay interest only on the amount drawn, making them more cost-effective during the building phase.
Yes, renovation loans cover upgrades such as kitchen remodels, extensions, and structural improvements, with funding allocated in progress payments.
Most lenders require a 10-20% deposit, depending on the property value and project cost. A larger deposit can help secure lower interest rates and better terms.
Approvals typically take 2-4 weeks, as lenders review building plans, cost estimates, and contracts before finalising the loan.
Yes, once construction is complete, borrowers can refinance into a standard home loan with principal and interest repayments, potentially securing a lower rate.
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