Construction Loans

Up to 70% of Gross Realisation Value (GRV)

Residential and commercial constructions are eligible

The loan term is tailored to the project

Zero presales option available

What is Construction Finance?

Construction finance is a specialised form of funding designed to support property developers in kickstarting their building projects or securing development sites.

Whether you’re involved in the creation of single or multi-dwelling residential units, commercial properties, or simply constructing your dream home, construction finance through Broc Finance provides a range of tailored funding options to meet your specific needs.

With Broc Finance, we talk with you to figure out the best way to finance your property development, whether it’s for homes, businesses, or a mix of both.

Critical information sheet

Our loan guide

Development / Construction Finance

Loan amount

Starts from $250k

Interest rates from

From 10.99% p.a.

Loan term

Up to 3 years

Pre-approval time

24 – 48 hours

Unconditional approval & settlement time

10-15 Business days

Repayments

Interest Only / Capitalised Interest

Security

Required with funding possibilities up to 70% of Gross Realisation Value (GRV)

What you need to know

Can be used for

To construct/develop a residential/commercial property

To get construction shortfall finance

Documents required

Valid identification proof

Security Details

Exit Strategy

Others depending upon loan product

*The information provided in critical information sheet is intended as a guide only. Please contact us for more information.

Types of Construction Finance

Gross Realisation Value (GRV)

Common form of development finance.
Various lending options based on either GRV* or TDC** (Total Development Costs).
Usually offers lower interest rates compared to other development finance options.
Often requires pre-sales or pre-commitment.

* The value (net of GST) of the development stock upon completion of the project.

**The sum of the hard and soft costs to complete a project excluding Development Application costs and the holding costs prior to Development Approval.

No Pre-sales Construction Finance

Doesn’t require pre-sales or pre-commitment.
Allows you to keep the built units for potential capital growth during construction.
Enables you to kickstart the project early.
Considered higher risk, leading to increased funding costs.
Assessment based on the strength of the sponsor or developer.

Mezzanine Finance

Allows the developer to maintain control over the development.
Preserves cash for multiple projects.
Enables a quicker project completion.
Typically comes with higher funding costs.
Involves a reduction in profit margin.
In this type, a second mortgage is placed on the security.
Understanding these options helps you choose the right construction finance strategy based on your project’s needs and your financial goals.

What you should know about Construction Finance

Have questions? Speak to our experts!

How does Construction Finance work?

Construction loans operate differently than standard home loans. Typically, they involve paying only the interest during the building phase, helping to keep your repayments minimal until the construction is complete.

During the construction phase, you’re only paying the interest, and once the building is done, the loan switches to a standard home loan. At that point, you start making payments that cover both the principal and interest

Pros and Cons of Construction Finance

Progress Payments for Construction Home Loans

When building a house, the money you get from the loan is given to you at different times as the work progresses. By giving funds in stages, lenders ensure that the money matches the progress of the building work. This approach helps minimise risks and ensures that the funds are used effectively at each step of the construction process.

These steps include

Foundations (Approx. 10% of Total Loan):

This initial stage involves laying the foundations of the house and installing plumbing.
Around 10% of the total loan is typically allocated for this phase.

Frame (Approx. 15-20% of Total Loan):

The frame phase encompasses building the structure of your property, including roofing, windows, walls, and trusses.
Progress payments during this stage generally range from 15% to 20% of the total loan.

Lock-up (Approx. 30-35% of Total Loan):

In this stage, construction focuses on internal walls, doors, and insulation to make the property weather tight.
Approximately 30-35% of the total loan is typically disbursed at this point.

Fit-out (Approx. 20% of Total Loan):

The fit-out phase involves adding finer details to the home, such as shelving, kitchen, and bathroom cabinetry, tiles, and internal cladding.
About 20% of the total loan is allocated for this stage.

Completion (Approx. 15% of Total Loan):

The final stage covers everything needed to complete the home, which may include the installation of retaining walls or fences and site cleaning.
Approximately 15% of the total loan is released during this completion phase.

Understanding these progress payments helps ensure that funds are appropriately allocated at each construction milestone, aligning with the progress of your home building project.

Owner-Builder Construction Loans

Understanding Construction Loans

When venturing into the realm of construction loans, it’s essential to grasp the nuances of owner-builder projects. Typically, to secure a construction loan, one would enter into a contract with a qualified builder. However, for those aspiring to take a hands-on approach in building their homes, there exists the option of applying for an owner-builder construction loan, available through a select group of lenders.

Obtaining approval for such loans can pose challenges, as lenders often perceive owner-builder projects as riskier, potentially prone to cost overruns. Licensed builders may secure loans for up to 80% of the construction cost, while non-licensed individuals may find borrowing limited to 50-70%.

Key considerations before applying

20% Deposit: Aim for a deposit of at least 20% to strengthen your loan application.
Solid Credit Score: Maintain a good credit score and keep debts to a minimum for better approval chances.
Detailed Construction Plan: Prepare a comprehensive construction plan, including cost estimates and quotes for tradesmen and materials.

Given the stringent criteria for these loans and the limited availability of lenders, prospective borrowers are advised to consult with a mortgage broker. A broker can assist in navigating the complexities of owner-builder construction loans, helping you find the right fit for your unique project.

Which kind of project is eligible for construction finance?

At Broc Finance, construction finance is suitable for low to medium sized of construction projects, including

Residential Construction:

Commercial Construction:

Property Development:

Home Renovations:

These categories encompass a wide range of commercial properties, each serving a specific purpose or industry. The distinction between commercial and residential properties is primarily based on the property’s use and intended function.

What documents are needed to apply for Construction Finance?

In addition to the usual documents needed for a loan application such as proof of identification proof and credit history records, construction finance may also require

Council plans and permits
Professional building plans
Proof of land purchase
Proof of contract with a licensed builder
Proof of builder’s insurance

How do I apply for a commercial property loan?

1.Submit Application

First step is to simply fill out the application form with the required information and loan request.

2.Get Indicative Quote

Once the application is received, our lending specialist would get an indicative quote within 24-48 hours.

3.Letter of Offer (LOO)

Once we receive the mandate to proceed basis indicative quote, we get a formal letter of offer from the lender.

4.Valuation and Legal Docs

On receipt of signed LOO, the lender would initiate valuation and get loan docs prepared.

5.Disbursement

Once we receive the mandate to proceed basis indicative quote, we get a formal letter of offer from the lender.

Construction vs. Standard Home Loan