D-03
Development finance
Duplexes, townhouses, small subdivisions and multi-unit projects. Finance structured around feasibility, presales and exit.
Find out more : Development financeD-02
Construction loans
Construction Loans in Melbourne
Plain English. Properly structured.
A construction loan pays your builder as each stage of the build is finished, not all at once. Get the structure wrong and you can stall a build halfway. We specialise in setting these loans up properly, for new homes, knock-down rebuilds and major renovations. We're based in Oakleigh and help clients across Melbourne and Australia-wide.
01 — What it is
Construction loans, in plain English.
With a construction loan, the lender approves a total amount based on the land and the value of the finished home, but releases the money in stages, called progress payments or drawdowns. A typical residential build has stages like base or slab, frame, lock-up, fixing and completion. Your builder issues an invoice at each stage, the lender may send a valuer to check the work, then pays the builder directly.
You usually only pay interest on the amount drawn so far, which keeps repayments lower early in the build. Many lenders offer interest-only repayments during construction, then switch to principal and interest once the home is complete.
The paperwork matters more than with a standard purchase. Lenders want a fixed-price building contract, council-approved plans, specifications, the builder's insurance details and a payment schedule that matches their stages. Variations, owner-builder work and cost-plus contracts all need careful handling, because the lender will only fund what it has approved.
We work with your builder and your conveyancer so the loan fits the contract, not the other way round. That's the core of what we do, and it's why we chose the name Ridge: the highest point of the roof is where everything has to meet.
02 — Who it suits
Is this the right fit?
- [A]People building a new home on land they own or are buying
- [B]Owners planning a knock-down rebuild
- [C]Homeowners doing a major renovation or extension
- [D]House-and-land package buyers
- [E]Investors building a home to rent
- [F]Clients anywhere in Australia, with a home base in Oakleigh, Victoria
03 — How it works with us
From first chat to settlement.
- 01Stage 1 of 4Review the build
Review the build
We look at your land, plans, builder quote and budget, and check the contract type will work with lenders before you sign anything.
- 02Stage 2 of 4Structure and approve
Structure and approve
We match the lender to the build, line up the stages with the builder's schedule and get approval based on the completed value.
- 03Stage 3 of 4Progress payments
Progress payments
As each stage finishes, we help get invoices to the lender, coordinate valuations and keep payments moving so your builder stays on site.
- 04Stage 4 of 4Completion and switch
Completion and switch
At handover, the final payment is made and the loan rolls over to standard repayments. We review it again once you have moved in.
04 — What lenders look at
What you'll need.
| Ref | Item | Why it matters |
|---|---|---|
| M-01 | Fixed-price building contract | Signed, with a progress payment schedule that lenders recognise. |
| M-02 | Plans and specifications | Council or building permit approved, matching the contract. |
| M-03 | Builder's details | Registration, plus domestic building insurance where required. |
| M-04 | Land contract or title | If you already own the land, the title and any current loan details. |
| M-05 | Income and ID | The usual: payslips or tax returns, photo ID, bank statements. |
| M-06 | Variations budget | Lenders fund what is in the contract. Extras usually come from your savings. |
| M-07 | Demolition quote | For knock-down rebuilds, if demolition is separate to the build contract. |
05 — Common mistakes
What to avoid.
Check 01
Signing before checking with a lender
Check 02
No buffer for variations
Check 03
Mismatched stages
Check 04
Forgetting holding costs
Q-01How do progress payments work?
Your lender releases money in stages as the builder completes each part of the build. The builder invoices, the lender may inspect, then pays the builder directly. We explain this in detail in our blog post on progress payments.
Q-02Do I pay interest on the full loan during construction?
Usually not. Most construction loans charge interest only on the amount drawn so far, so repayments grow as the build progresses.
Q-03Can I get a construction loan as an owner-builder?
It is harder, and fewer lenders offer it. It depends on your experience and the project. We will tell you honestly whether it is likely to work.
Q-04What happens if my build goes over budget?
The lender usually funds only what was approved. Extra costs typically come from your own funds, or you may be able to apply for an increase. That is why we build a buffer into the plan.
Q-05Can I get a construction loan outside Victoria?
Yes. We are based in Oakleigh but work with clients building across Australia.
Q-06How is a construction loan valued?
The lender values the land plus the planned build, giving an "as if complete" value. Your borrowing is assessed against that figure.
07 — Related
Related loans.
D-01
Home loans
Buying your next home or an investment property in Melbourne. We compare lenders and structure the loan around your plans.
Find out more : Home loansD-09
Bridging loans
Buy your next home before you sell the current one. Short-term finance that bridges the gap between purchase and sale.
Find out more : Bridging loansFrom the blog
Construction6 min read
How Construction Loans Work in Victoria: Progress Payments Explained
A plain-English guide to how construction loans are paid out in stages, what each progress payment covers, and how to keep your build and your finance in step.
Construction5 min read
Knock-Down Rebuild Finance: What You Need to Know Before You Start
Planning to demolish and rebuild on your block? Here's how knock-down rebuild finance works, what lenders look for, and how to budget for the costs people often miss.
Development5 min read
Development Finance for Small Projects: Duplexes, Townhouses and Subdivisions
Thinking about a duplex, a few townhouses or subdividing your block? Here's how small-scale development finance works, what lenders assess, and how to prepare.
08 — Enquire
Tell us what you're planning.
No cost and no obligation. We'll help you understand your options and what the next step looks like.
Prefer email? Write to help@ridgefinance.au.