Building a home

How the money actually reaches your builder

You do not receive the loan as a lump sum. Funds are released in stages as your builder completes them, usually across five or six progress payments.

A typical structure looks like this, though the exact split varies between lenders and contracts:

• Slab or foundations, roughly 15 to 20% of funds
• Frame, roughly 20%
• Lock-up, meaning windows, doors, external walls and roof, roughly 20%
• Fit-out, meaning internal fittings and fixtures, roughly 30%
• Completion, meaning final detailing and site clean, roughly 10%

At each stage your builder issues an invoice. You check the work has actually been done, sign and forward the invoice to your lender or broker, and the lender pays the builder directly.

This is the part people underestimate. You are the one authorising each payment, which means you are also responsible for satisfying yourself that the work is finished before you do. If you are not confident assessing whether a stage is genuinely complete, it is worth engaging an independent building inspector before you sign off.

Your repayments will go up during the build

During construction you generally pay interest only, and only on what has been drawn so far.

That sounds better than it turns out to feel. Your repayment after the slab payment is small. After the frame it is larger. By the time you reach fit-out you are paying interest on most of the loan, and you may still be paying rent or an existing mortgage at the same time.

So the question is not whether you can afford the repayment on this loan. It is whether you can afford the repayment as it climbs, while also paying to live somewhere else.

Once the final payment is made, the loan generally reverts to principal and interest.

You usually have to spend your own money first

This one catches almost everyone.

Lenders generally require you to contribute your share of the build cost before they release any of theirs, and to provide receipts proving you have done it.

If your building contract is $600,000 and you are borrowing 80%, you would typically need to pay the first $120,000 to your builder yourself before the lender funds anything further. The exact requirement varies by lender and by how your land and deposit are structured, but the principle is common.

It is the difference between having a 20% deposit and needing 20% in cash, available early, before the bank does anything.

Land and build are usually two separate contracts

If you are buying land and building on it, you will usually have two contracts: one to buy the land, one with your builder.

The land settles first, funded by an initial drawdown. Construction drawdowns follow as the build progresses.

A single contract, sometimes called turnkey, covers both together and is more common with house and land packages from a developer. It is simpler, but you generally have less control over inclusions and specifications.

Which one you are signing changes your deposit timing, your stamp duty position, and how the lender assesses the whole thing. It is worth knowing which structure you are in before you commit.

What your building contract may not cover

Fencing. Driveways. Landscaping. Blinds and window furnishings. Letterbox. Clothesline. Sometimes floor coverings.

Some builders include some of these. Many do not. Turnkey contracts usually include more. The only way to know is to read your contract inclusions and exclusions carefully, and to price anything missing before you sign.

There is a second consequence people miss. If you are paying for these separately, get quotes and give them to your broker so they reach the valuer. If the valuer does not know about them, they are not counted in the valuation of the finished property, which affects the numbers the lender is working from.

Fixed price does not mean the price cannot change

Most lenders require a fixed-price building contract. That does not mean the final figure cannot move.

Prices change through variations, meaning changes to the specification during the build, whether you request them or site conditions force them. Changing cladding, upgrading fittings, unexpected site costs.

If a variation pushes the cost above what your lender approved, you would need to ask whether they can fund the difference. If they cannot, you cover it yourself. That is the position most lenders set out plainly.

The practical implication: build a buffer into your budget before you start, and treat variations as decisions with a financing consequence rather than just a design choice.

Delays cost money in a way that is easy to miss

Builds run late. When they do, you are paying interest on a partly drawn loan while also paying rent, and you are doing it for longer than you planned.

Lenders also apply timeframes. Construction generally has to commence within a set period after settlement and be completed within a defined window. If a build runs beyond it, that is a conversation with the lender rather than something that resolves itself.

If you are renting through the build, work out what an extra three or six months actually costs you, and decide whether you can carry it.

Valuations happen twice, and both matter

At the start, a valuer assesses what the property is expected to be worth once complete, based on your plans, specifications and fixed-price contract. That figure is what your lending is assessed against.

Before the final progress payment, the lender generally arranges a final valuation, and will usually want your building insurance in place, along with an occupancy certificate or equivalent depending on your state.

This is why the contract and specifications matter so much. The valuer is valuing what is described on paper. If your out-of-contract items were never provided to them, they are not in the figure.

Victorian grants and concessions when you build

These are Victorian rules and they change. Everything below was correct at the time this page was last reviewed, but check the current position with the State Revenue Office or with me before relying on it.

First Home Owner Grant

A $10,000 payment for eligible first home buyers building or buying a new home.

• The total value, including land, must not exceed $750,000
• It applies to new homes only. Established homes do not qualify
• You must live there as your principal place of residence for 12 continuous months, starting within 12 months of completion
• The regional Victorian $20,000 grant ended in 2021 and has not returned. Ballarat buyers access the same $10,000 as everyone else
• It is usually applied for through your lender, and for a build is generally paid at the first progress payment rather than at land settlement

Stamp duty

For eligible first home buyers in Victoria, a full exemption generally applies where the dutiable value is under $600,000, with a sliding concession between $600,000 and $750,000. Above $750,000, no first home buyer concession applies.

When you build on land you buy, duty is generally assessed on the land rather than on land plus build, which usually works in your favour. How this applies depends on your contract structure, so it is worth confirming with your conveyancer early.

First Home Guarantee

A federal scheme that lets eligible first home buyers borrow with a deposit as low as 5% without paying lenders mortgage insurance. The government guarantees part of the loan rather than giving you money.

Two things changed from 1 October 2025: there are no longer income caps, and no limit on places.

The price cap is the part that matters most in Ballarat. The cap is $950,000 for Melbourne and Geelong, but $650,000 for the rest of Victoria, which includes Ballarat. A national article will often quote the metropolitan figure. For a Ballarat build, $650,000 including land is the number to work to.

You can use it for a house and land package or for land with a fixed-price build contract, but construction timeframes apply and vary by lender.

Using them together

These can generally be combined. A first home buyer building in Ballarat under $600,000 could potentially access the $10,000 grant, a full stamp duty exemption, and avoid lenders mortgage insurance through the First Home Guarantee.

Whether you qualify for all three depends on details these general rules do not cover, and on choosing a lender that participates in the scheme. It is worth checking before you sign a contract rather than after.

What I would want to look at

If you are thinking about building, the useful conversation happens before you sign a building contract, not after. What I would want to see:

• Your building contract or quote, and what it includes and excludes
• The land details, and how the land and build are structured
• Your deposit position, and how much of it is available early
• Your timeline, and what you are paying to live somewhere in the meantime