Financing a new build works differently to buying an existing property. Here's a general overview of how house-and-land and construction finance works for investors. It's general information about the credit side only — for tax (including negative gearing and depreciation) and any structuring questions, see your accountant.
How a construction loan works
With a house-and-land package, the land and the build are usually funded through a construction loan that releases money in stages (slab, frame, lock-up, fit-out, completion). You generally pay interest only on the amount drawn during the build, which keeps holding costs lower while the home is being built.
Lenders assess the land value plus the fixed-price build contract, so a clear, fixed-price contract with a licensed builder makes the finance smoother.
Off-the-plan timing
With off-the-plan purchases, finance is typically arranged closer to completion, and the lender values the property at completion. Because valuations and your circumstances can change between contract and settlement, it pays to plan the finance early and keep a buffer.
Things to consider
- Progress payments and cash flow — interest is charged as funds are drawn.
- Valuation risk — the completed valuation can differ from the contract price.
- Timing — builds and approvals take time; build a buffer into your plans.
- Borrowing to invest magnifies gains and losses; values and rents aren't guaranteed.
Use our borrowing power and repayments calculators to plan, and the depreciation estimator for an indicative new-build depreciation figure (a quantity surveyor prepares the actual schedule).
We handle the loan
We arrange construction, house-and-land and off-the-plan finance and manage it through to settlement — see new-build & house-and-land investment finance or start an enquiry.