Build Smart, Spend Less: Nail Your Construction Loan from Day One 🏡🔧

Financing is every bit as important as bricks and mortar. Unlike a standard mortgage, a construction loan releases funds in stages and charges interest only on money you’ve actually drawn. Use that quirk to your advantage and you can trim thousands off the total cost of your build. Below are four proven tactics our Property Basics community puts into practice.

🛠 1. Draw Down Only When You Truly Need the Cash
Progress payments (slab, frame, lock-up, etc.) trigger interest the moment the funds hit your loan. Hold off authorising each drawdown until your builder is ready to start that stage. Every day you delay tapping the bank’s money is a day you’re not paying interest.

💸 2. Pay the Interest as You Go (Don’t Capitalise It)
Rolling interest into the loan balance feels painless now, but it means you’ll pay interest on interest once the facility converts to a regular mortgage. If your budget allows, cover the monthly interest out of pocket during construction. Short-term pain, long-term gain.

🏦 3. Park Spare Cash in an Offset Account—If Your Lender Lets You
Several major Australian banks (e.g. CBA, Westpac, Macquarie) let you link a 100% offset account to the construction facility. The offset balance reduces daily interest only on the portion you’ve already drawn, not on the full loan limit.

Example: You’re approved for $500 k but have drawn $200 k. Parking up to $200 k in the offset can wipe out interest until the next drawdown. Any cash above that simply waits to offset future progress payments.

✔ Check first: not every lender offers offsets during construction, some charge extra fees, and many require the loan to be on a variable rate while you build.

🧱 4. Chip In Small Extra Repayments Early
Even while walls are still going up, throwing an extra $50–$100 at the loan each month chips away at the balance and eases you into full principal-and-interest repayments later. Confirm your lender allows extra payments during construction, as fixed-rate tranches can have limits.

Final Thoughts
Delay drawdowns, pay interest as it falls due, take full advantage of any offset feature, and make the odd extra repayment—four simple moves that leave more cash in your pocket and less in the bank’s.

At Property Basics we’re here to help you build smarter, not harder. 🎓 Keen for deeper guidance? Our Home Build Program unpacks every stage—from finance to hand-over—with step-by-step lessons, downloadable resources, expert Q&A, and an AI assistant on call 24/7.

Disclaimer: This article provides general information only and does not constitute personal financial advice. Always consult a licensed mortgage broker or financial adviser to determine what’s right for your circumstances.