Construction Loan Calculator Guide

Find out how much it will cost to build your dream home with a construction loan calculator. From the foundations to the finished product, you’ll know what your costs will be. Keen to know how it all works? Monzi’s here. We’ve assembled this guide covering all the construction loan details you might need to know. Let’s go.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

Construction loans explained

A construction loan is a form of home financing designed for those people who are building their dream home rather than just purchasing one that’s already standing. With this, the structure is different from a typical mortgage.

Rather than simply getting a lump-sum when you apply, a construction loan has what’s known as a progressive drawn-down. That means you may increase your borrowing as costs arise. For instance, maybe you need to pay the builder or tiler.

Through the construction process, the loan is typically interest-only. In other words, your repayments only cover interest and the principal is not reduced. However, once construction is completed it converts to a typical mortgage loan structure.

In addition to this, construction loans may also be available for renovations. As a result, if you purchase a house that has potential but needs a few upgrades, these loans could be the finance option you need.

Finally, the amount you can borrow is typically based on the estimated value of your completed property.

Construction loan: the steps

Construction loans are much different to normal mortgages. After all, they’re a little bit more complicated.

As discussed, you can borrow as costs arise through the five building stages. That way, rather than getting a lump sum and trying to budget, you can borrow as needed.

The five stages are:

  1. Base: cover the costs of laying the foundations of your new home.
  2. Frame: This where your house begins to take shape. Expenses may include brickwork, roofing or window frames.
  3. Lockup: after this stage house will look great from the outside. While there’s still much to do inside, you’ll have doors, windows and external walls.
  4. Fit-out: At this stage, we move into all the internal necessities. Plumbing and electricity as well as plasterboard are all potential costs.
  5. Completion: get the cash you need to put the finishing touches on your home. May include payments to builders and contractors.

How do I apply for construction loans?

The application process for a construction loan is different from a normal mortgage. Luckily, we’re here to run you through how it will work.

First things first, you will need to present your plans to the lender. This may include designs, plans, specifications and quotes. These plans will be evaluated by a property appraiser to determine the property’s expected value. From there, the lender can determine your potential loan.

At that point, the process will be similar to a mortgage. Your lender will assess your financial situation and credit history in order to determine your suitability for credit. If your application is approved, you will then be required to sign the loan contract and provide the down payment (may be up to 30%).

Construction loan calculator: interest rates

Your construction loan interest rate will depend on a number of factors. As a general rule, these loans typically come with higher interest rates in order to account for the lender’s additional risk. However, this may not always be the case

More often than not, lenders will base your interest rate on your credit history, the amount you borrow as well as the final value of your property. However, there may be other relevant factors. This is simply just a brief outline.

If you are approved for a construction loan then your interest rate will be clearly outlined for you in your loan agreement.

How much do you need for a construction loan?

Lenders will typically ask for a down payment of at least 20% (can range up to 30%). However, this may vary depending on your land, construction plans, financial situation and the lender you are dealing with.

As you may have noticed, this amount is greater than what’s required for a typical home loan. Most mortgages require a minimum deposit of just 10%. So, why is this?

Well, for lenders, construction loans are risky. While plans may be in place, costs can run higher than expected and market forces can affect the final value of your property. As a result, lenders must take additional steps to protect themselves from the risk. This includes higher down payments.

Do you make monthly repayments on a construction loan?

In short, you will likely get to choose between weekly, fortnightly or monthly repayments. So, pick the one that works best for you.

Through the construction period, you will only be required to make your interest payments on the amount you have borrowed. However, once that’s completed, the loan will revert to the standard principal and interest style mortgage.

Online construction loan calculator

With an online construction loan calculator, you may be able to get an estimate of what your loan repayments will be. Do a quick search online and you may find a number of financial institutions that provide these resources for free.

Simply enter the details of your loan (e.g. amount, interest rate, term, interest-only period) and you will get an estimate of your repayments. From there, you can see how the numbers stack up with your budget.

However, remember that these repayments are only an estimate. As a result, use them simply to get an idea of their affordability. Ultimately, your lender will determine your final repayments based on the amount you borrow.

Is it harder to get a construction loan?

Yes, generally lenders are more reluctant to offer construction loans than regular mortgages. In short, it’s simply due to the risk that comes with the uncertainty. After all, lenders cannot determine with absolute certainty how much you will need to borrow or what the final value of your home may be.

As a result, lenders may apply more stringent criteria and requirements. Not only will you need to prove that you are in a strong financial position but you may need to provide a deposit of up to 25% too. In addition to this, higher interest rates or additional charges may also be applied.

Construction loan calculator comparison

Comparing construction loans is a crucial step before reaching a loan agreement. Picking the right loan and lender can ensure you get the best possible value. You may be able to maximise your borrowing power or save yourself money.

So, consider the following when comparing construction loans:

  • The interest rate: lower is better. In the long run, a competitive interest rate will reduce your total loan costs.
  • Fees and charges (e.g. establishment or appraisal fees)
  • Features and term: what’s the repayment period? Are there any restrictions on the amount you can borrow through the construction process?
  • The lender: check their reviews online to determine how they treated past borrowers. An understanding lender may reduce your stress and help you out at each step along the way.

For more details on how to compare home financing, head to the Australian Government’s Moneysmart website.

Construction loan calculator builder with power saw cutting wood

Which lender is best for construction loans?

In short, we are unable to say which lender is the best. Ultimately, it will be your decision. You will need to compare the loan products on offer and determine which one is right for your circumstances.If you’re looking for a trustworthy and understanding lender, a useful tip is to consult their user reviews. Get an idea of how they treated their borrowers in the past. From there, you can decide if that lender is right for you.

In addition to this, make sure your lender is licenced by all relevant authorities.

What kind of credit score do you need for a construction loan?

In short, you typically need a good credit score in order to be approved for a construction loan. Due to the lender’s inherent risk, they will typically only extend credit to reliable borrowers with a strong history of making repayments on-time.

In saying that, options may exist for you if you don’t quite have perfect credit. Some lenders may still consider your application. However, there may be restrictions applied on the amount you can borrow or you may be charged a higher interest rate.

Is there a time limit on my construction?

Yes, typically you will need to have your house built within a certain time period as part of your loan agreement. As a guide, most lenders will allow you a period of two years to complete construction.

Questions to ask before applying

You’re making a significant financial commitment when you apply for a construction loan. As a result, don’t treat them lightly. After all, you may be making repayments for the next 30 years!

As a result, it’s crucial to do your research and determine if they are the right product for you. Before applying, questions to ask include:

  • Should I build my own home or just buy an existing house?
  • Do I need to have a licenced builder construct my home?
  • What happens if the builder goes broke?
  • Are there limits on the amount I can borrow?
  • Is there flexibility if I need to borrow more or wish to make repayments early?

Construction loan and Monzi

While we’ve run you through all the key details of applying for and using a construction loan calculator, unfortunately, Monzi is unable to offer this product. However, what we can do is make it simple and easy to access personal loans online.

Apply and we may be able to match you with an available lender from our network in just 60 minutes. Access cash loans up to $10,000 with repayment periods that may range from 12 to 24 months.

What kind of loans can Monzi find?

As mentioned, Monzi has a panel of lenders potentially able to offer personal loans. More specifically, lenders may be able to offer the following:

Small personal loans$300 to $2,00012 month repayment termUnsecured
Medium personal loans$2,001 to $4,60013 to 24 month termSecured
Large personal loans$5,000 to $10,000013 to 24 month repayment termSecured

If you apply during normal business hours, we may have an outcome for you within 60 minutes. Talk about a stress-free lender-finder service!

Finally, Monzi is always 100% free. No matter the outcome, you’ll never pay a cent for our service. So what are you waiting for? You might be paired with your new lender sooner than you think! All applications happen online.

And, if you’re looking to read some more before you go, why not check out our term deposit rates article?

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000


12 months (minimum)

12 months (maximum)


20% upfront establishment fee

+ 4% monthly fee


Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. The minimum and maximum loan term is 12 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Loan amount

$2,001 - $4,600


13 months (minimum)

24 months (maximum)


48% Annual Percentage Rate (APR)

67.41% Comparison Rate p.a.


Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principal Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Annual Percentage Rate (APR) for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000


13 months (minimum)

24 months (maximum)


21.24% Annual Percentage Rate (APR)

48% Comparison Rate p.a.


Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principal Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Annual Percentage Rate (APR) for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.