New home purchases rose by 5.3% in February 2024, according to the Housing Industry Association (HIA). While this increase is a positive sign, HIA Chief Economist Tim Reardon cautioned that it comes off a very low base. Despite consistent demand for housing, 2024 ultimately recorded the lowest level of new home construction in over a decade, confirming earlier forecasts.

Even though building activity has remained subdued, lenders are continuing to support Australians who are ready to build or renovate. If you’re planning a project, it’s important to understand how construction finance works and how the right structure can help you manage costs effectively throughout your build.

Construction Loans Make It Possible

When you’re building a new home or undertaking a major renovation, a standard home loan won’t cut it. Instead, banks offer construction loans: specialised finance designed to support staged payments during a build.

Here’s what you need to know:

• You’ll need to provide a fixed-price building contract, council-approved plans, and relevant permits.

• Instead of receiving the full loan amount upfront, funds are released in stages (usually five) as work progresses.

• You only pay interest on the funds drawn down, helping you avoid paying interest on unused amounts.

• Construction loans typically last for 12 to 24 months. Once construction is complete, the loan can convert to a standard home loan.

This structure gives you greater control over your cash flow, especially during a lengthy or complex build.

Why It’s Still a Good Time to Build

Despite the overall slowdown in construction approvals, the underlying demand for housing in Australia remains strong. Population growth, tight rental markets, and limited supply support long-term home value.

For those in a financial position to move forward, the current environment offers opportunities, especially with lenders remaining active and competitive in the construction space. That said, the process is more detailed than a typical home loan, which is why working with an experienced broker is essential.

How Peel Finance Brokers Can Help

At Peel Finance Brokers, we guide clients through every stage of the construction loan process. Our team can assist you with:

• Finding the most competitive construction loan for your project
• Preparing your documentation for approval
• Coordinating with your builder and lender during progress payments
• Managing the transition to a standard home loan once construction is complete

We offer tailored finance solutions and expert advice that help you avoid delays, reduce costs, and build with confidence.

Whether you’re constructing your first home or upgrading your existing space, the right finance makes all the difference. Contact Peel Finance Brokers today to explore your construction loan options and secure a lending solution built for your project.

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