Construction and vacant land

Building a home can be both an exciting and challenging journey, and our construction loan is designed to make the process as simple and stress-free as possible. This guide covers the key points on how your construction loan will work.

Construction and vacant land loans are based on valuations made at purchase, slab and lockup. We offer up to a maximum LVR of 90% for owner occupiers and 90% for investment properties (inclusive of LMI).

We can consider land sizes up to 100 Hectares on a case-by-case basis.

How does a construction loan work?

Our construction loan allows your clients to access loan funds at the completion of each stage of their build, meaning that they’ll only be paying interest on funds as they need them and not upfront on the full amount. These repayments are interest-only during the construction period and are repaid monthly.

To ensure that construction is fully completed and ready to move in after the final payment, we will always make sure that we’re holding enough funds to complete each stage all the way through to the end. If your client is not borrowing the whole amount of the construction cost, and contributing funds of their own, they’ll need to contribute those funds first. Once all funds have been contributed, our funding process will begin.

Typical stages of construction

(Note: The housing industry uses the following percentages as a baseline; these percentages are of a general nature and may vary.)

Construction LVR calculation

LVRs are calculated by expressing the amount borrowed as a percentage of the security value. The security value for construction loans must be calculated using the following figures:

  • The lower of the land value shown on the valuation OR Contract of Sale PLUS

  • The lower of the improvement value shown on the valuation OR the Fixed Price Building Contract including any variations.

In the following example, the security used by some lenders to calculate the LVR is $295,000.

Vacant land loans

Vacant land loans are available to purchase land for either owner occupied or investment purposes.

  • The maximum LVR is 95% for owner occupier loans (including LMI capitalisation).

  • Investment loans are capped at 90% LVR (including LMI)

  • Vacant land finance is only available on the variable rate product.

  • The valuation will be for the vacant land only on an ‘as is’ basis.

  • Advantedge offers no guarantee that it will approve further requests for additional funds in the future and requires full credit information to be provided for any requests for additional funding.

  • Where existing loans/securities change to vacant land by either substitution of securities or subdivision of land, vacant land/construction conditions apply.

  • Where the loan is not re-documented, the Borrower’s Guide to Vacant Land and/or Construction Funding must be issues to the borrowers.

  • FHOG proceeds are not available to fund vacant land. Refer to FHOG Policy for more information.