Construction Loans in Sydney

Most construction loan applications require:

A fixed-price building contract signed with a licensed builder 

Council or DA-approved plans and specifications 

Builder documentation - licence, public liability insurance, and home warranty insurance 

A progress payment schedule aligned to build stages 

Standard financial documents (payslips, tax returns, bank statements) 

If owner-builder: an owner-builder permit and detailed costings 

We review these upfront to make sure everything meets lender requirements before submission.

A knockdown-rebuild involves demolishing your existing home and building a new one on the same block.

The key consideration is cashflow. During construction, you’ll usually be paying rent while also covering the construction loan. We model this upfront so you understand the full financial impact before proceeding.

An owner-builder acts as the head contractor, managing trades instead of using a single licensed builder.

From a lending perspective, this is more complex. Most major banks either won’t lend or will cap borrowing at a lower LVR (typically 60–70%). Some specialist lenders will go up to 80% LVR, but require a detailed cost breakdown and evidence of building experience.

Owner-builder can work well if you have genuine construction experience. For most clients, the savings are often less than expected once time, trade coordination, and lending restrictions are factored in.

Minor renovations like a new kitchen, bathroom, or cosmetic updates are usually funded through an equity release on a standard home loan. There are no progress payments or building contracts required; the funds are drawn upfront and can sit in an offset account until needed.

Major renovations such as extensions, second storeys, or structural work typically require a construction loan. Funds are released in stages, tied to a fixed-price building contract.

From application to completion, a standard new build typically takes 12–18 months:

Application & approval: 3–6 weeks 

Land settlement (if applicable): 4–6 weeks after exchange 

Plans, approvals & builder selection: 2–6 months (often longer in Sydney) 

Construction: 8–14 months for a standard build 

Occupation certificate & loan conversion: 2–4 weeks after completion 

Timelines vary by council, builder, and project complexity, but this is a realistic guide for most Sydney builds.

Signing with a builder before lender approval

Not all building contracts meet lender requirements. Always confirm acceptance before committing. 

Unplanned variations
Mid-build upgrades can push costs beyond your loan. Lenders won’t automatically increase funding - allow a contingency. 

Underestimating holding costs
Rent plus interest during construction can add up quickly - often $40,000–$80,000 on a typical Sydney build. 

Choosing owner-builder without full cost comparison

LVR restrictions and lender limits can reduce borrowing capacity, often offsetting any perceived savings.

There are three key differences:

Funds are released in stages, not as a lump sum 

Repayments are interest-only during the build and increase as funds are drawn 

Additional documents are required (fixed-price contract, approved plans, builder insurance).

A progress payment is a staged release of funds tied to construction milestones - typically slab, frame, lock-up, fix-out, and completion.

At each stage, the builder invoices, the lender confirms the work, and funds are paid directly to the builder.

In most cases, yes.

Fixed-price contracts give lenders certainty over total cost. Cost-plus contracts are accepted by fewer lenders, usually with lower borrowing limits and stricter conditions.

Variations are usually funded from your own savings.

Some lenders may consider increasing the loan if the change adds value, but this is treated as a new application. It’s best to allow a 5–10% contingency from the start.

Conditional approval: 5–10 business days 

Unconditional approval: a further 2–4 weeks after contract and plan review 

The first drawdown usually occurs at slab stage, often two to three months after approval.

After practical completion, the lender completes a final inspection and releases the last payment.

Once the occupation certificate is issued, the loan converts to a standard principal and interest home loan, and repayments adjust accordingly.